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CD&R to cash in on Brakes

Clayton Dubilier & Rice, a US buyout firm, is set to take advantage of growing private equity interest in wholesale and distribution businesses by selling Brakes, a UK catering business valued at about £1.2 billion.

US buyout firm Clayton Dubilier & Rice is plotting the £1.2 billion (€1.8 billion; $2.3 billion) sale of Brakes, a UK-based catering services supplier that it has owned since 2002.

A banking source said CD&R has hired Deutsche Bank and JP Morgan to sell Brakes, which is the UK’s biggest supplier of food to the catering industry. The company is expected to be valued at about £1.2 billion, a multiple of about eleven times its 2006 earnings of £109 million, and both private equity and trade buyers are expected to show interest.

CD&R is set for a healthy return on its investment in Brakes, having backed a £434 million management buyout of the business in 2002. This included an equity investment of £180 million. The business has since increased revenues to £1.67 billion through organic growth and further bolt-on acquisitions.

The sector is proving an attractive one for big buyout firms – CD&R has reportedly teamed up with Kohlberg Kravis Roberts to bid for US Foodservice, a division of Dutch company Ahold, where it is set to face competition from The Blackstone Group, Bain Capital and Texas Pacific Group.

CD&R is also seeking exits from two other distribution businesses – French electrical products wholesaler Rexel, which is set to list in Paris, and pharmaceuticals distributor VWR.

The buyout firm strengthened its expertise in the sector last year by hiring Charles Banks, the former chief executive of building supplies group Wolseley, as a partner in its New York office.