Three private equity firms are planning to list French electrical equipment distributor Rexel in what would be the largest sponsor-backed flotation in Europe.

Rexel last week invited banks to pitch for the deal, which could raise up to €4bn ($5.1bn), according to bankers. The float would exceed the £1.23bn (€1.81bn) raised in 2003 by UK telephone directory firm Yell to become the largest private equity-backed European flotation, and could become the world's largest, beating Japan's Shinsei Bank's $2.37bn (€1.87bn) initial public offering in 2004. A flotation, pencilled in for the first quarter of next year, would come two years after the company was taken private by French investment company Eurazeo, US buyout firm Clayton Dubilier & Rice and Merrill Lynch's private equity arm. The buyout consortium paid €3.7bn to French luxury retailer Pinault Printemps Redoute, which last week said it saw no reason to sell other divisions to private equity groups despite receiving offers. The float plan suggests private equity groups remain some of the most active participants in European IPOs, despite research that says their share of the market has fallen. Rexel's planned listing also shows the global stock market correction in May has not made issuers turn away from public equity markets as a sale option. The aftermarket performance of companies floated by private equity firms has lagged the rest of the IPO market, according to analysis conducted in June by Financial News. The average return on private equity flotations was 73% from 2003 to the end of last month against 137% for other IPOs. This pattern was repeated last year with an 18.4% return, compared with 29.7% for non-private equity-backed floats. Rexel has asked bankers to pitch for the listing mandate, but the performance of other IPOs in the same sector will be an important factor in deciding whether to actually go ahead with the listing. US buyout firm Kohlberg Kravis Roberts and French investment company Wendel floated French electrical group Legrand in April for €972m, three years after buying it from French company Schneider Electric. Shares in Legrand have since traded down about 5% in line with the market and at about 15 times its estimated earnings. Rexel would be worth between €7bn and €8bn at IPO at a similar multiple to Legrand, say analysts. However, Rexel's purchase in July of GE Supply from General Electric, which nearly doubled its US sales, needs time to bed in, sources said, a factor that could delay the float. Rexel's potential float comes as private equity-backed listings have fallen as a proportion of the listings market. According to French bank SG Corporate & Investment Banking, such IPOs accounted for 22% of money raised in the European market in the first half this year, compared with 41% in the same period last year. This is because of the growth of the European IPO market this year. SG pointed out that private equity firms remain some of the most regular providers of flotation business. Last week, private equity-backed Dutch pipe manufacturer Wavin confirmed it would float this year as it published its results for the first half of this year. Wavin, which is 80% owned by private equity firm CVC, last month hired ABN Amro, Lehman Brothers and Merrill Lynch to lead a €1.1bn Amsterdam initial public offering.