PAI Partners and Goldman sell Xella to buyout group Lone Star

* Sale at a premium to peers' valuation -sources

* Lone Star beat Bain, Apollo and Blackstone (NYSE: BX - news) -sources (Adds deal values Xella at 2.2 billion eur, according to sources)

FRANKFURT, Dec (Shanghai: 600875.SS - news) 1 (Reuters) - Private equity (IOB: 0QLS.IL - news) group PAI Partners (IOB: 0QOQ.IL - news) and funds managed by Goldman Sachs (NYSE: GS-PB - news) ' investment arm have agreed to sell Germany-based building materials maker Xella to buyout group Lone Star.

The deal is expected to be completed in the first half of 2017, after Lone Star beat Bain Capital, Apollo and Blackstone in an auction launched in September after an attempt to float Xella on the stock exchange last year failed.

Further terms of the transaction have not been disclosed, Xella said in a statement on Thursday.

Two people close to the deal said the transaction values Xella at about 2.2 billion euros ($2.3 billion), or roughly eight times its expected 2017 core earnings of 270 million euros.

That compares to a valuation of 6.5 to 7.5 times expected core earnings at which peers such as Wienerberger (IOB: 0MKZ.IL - news) , Braas Monier or Etex (Brussels: BE0941244536.BR - news) trade.

Xella says it is the world's largest manufacturer of aerated concrete blocks, calcium-silicate units and high-performance boards.

Building materials brands such as Ytong, Hebel and Silka account for roughly two thirds of the Duisburg, Germany-based group's business, while a fifth of its sales comes from higher-margin lime and limestone businesses, which account for almost a third of group earnings.

In the 12 months through September, Xella posted earnings before interest, taxes, depreciation and amortization (EBITDA) of 220 million euros on 1.3 billion euros in sales.

The group has 96 production plants in 20 countries and employs 5,900 staff globally.

Citi advised Lone Star on the deal, Lone Star's first investment in the industrials sector in Germany. The U.S. fund's other German investments include lender IKB (Hamburg: 337280.HM - news) as well as real estate firms like Isaria.

The sellers were advised by Goldman Sachs and Morgan Stanley (Shenzhen: 002588.SZ - news) . ($1 = 0.9421 euros) (Reporting by Arno Schuetze, Alexander Hübner and Andrew MacAskill; Editing by Susan Fenton)