Investor groups ready bids for German motorway station group

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By Arno Schuetze, Freya Berry and Claire Ruckin

FRANKFURT/LONDON, March 27 (Reuters) - Several investor groups are preparing to bid for German motorway service station group Taoutnk & Rast in a deal worth up to 3.5 billion euros ($3.8 billion), sources familiar with the transaction said on Friday.

Tank & Rast could appeal to pension funds and insurers who are focusing on infrastructure investments to generate better returns than from government bonds, the sources said.

Terra Firma, run by British financier Guy Hands, has asked Deutsche Bank (LSE: 0H7D.L - news) and JP Morgan to explore options for the business, which operates 350 petrol stations and 390 service stations.

A consortium of German insurers Allianz and Munich Re, sovereign wealth fund Abu Dhabi Investment Authority and Borealis, part of pension fund OMERS, aims to hand in an offer by next month's deadline, the sources said.

Canadian pension funds PSP and Ontario Teachers as well as Singapore sovereign wealth fund GIC are working on a joint offer, they said. The infrastructure arm of Australia's bank Macquarie is also expected to express interest.

Terra Firma bought the group for 1.1 billion euros in 2004 before selling 50 percent to Deutsche Asset & Wealth Management in 2007. Deutsche is also offering to sell and will not bid for the remaining stake, sources said.

The business is expected to have core earnings of about 240 million euros in 2015, one source said. The seller is hoping for a valuation of up to 15 times core earnings (EBITDA) in a deal potentially worth between 3 and 3.5 billion euros.

However, a separate source said such a price could make it tough for private equity buyers to extract value and could be better suited to longer-term infrastructure investors.

Some buyers are viewing the asset as a yield play due to its steady earnings flow and could expect to earn an internal rate of return (IRR) of 10-11 percent by following its current business plan, one of the sources said.

Other bidders are looking at everything from cashing in on Tank & Rast's consumer data to raising the price charged to use its toilets. Such a strategy could yield an IRR in the mid-teens, the source said.

While the equity part of the investment may be more than 1.2 billion euros, bankers are working on debt packages of 2.1 billion euros, including 200 million in undrawn debt. ($1 = 0.9236 euros) (Editing by Keith Weir)