A public markets deal which has not been seen in London for more than a decade will re-emerge on Friday when SIG, a building materials group, unveils plans to sell a big stake to the buyout firm Clayton Dubilier & Rice (CD&R).
Sky News has learnt that SIG, which has brought in a new management team to spark a turnaround in its fortunes, is close to securing a major investment from CD&R worth tens of millions of pounds.
The construction materials company is also said to be planning to raise money from existing shareholders as part of a comprehensive attempt to shore up its balance sheet amid the coronavirus pandemic.
SIG’s largest investors are understood to have been briefed on the proposed transaction ahead of the company’s delayed full-year results announcement on Friday morning.
If the investment from CD&R is completed, it would be the first so-called PIPE (private investment in public equity) transaction in a London-listed company since 2009, when Warburg Pincus acquired a substantial stake in Premier Foods, the Mr Kipling maker.
Such deals have been rare in the UK because of the system of pre-emption rights which prioritises existing investors in capital-raisings.
The coronavirus outbreak prompted expectations that PIPE deals would make a comeback in the London market, but the deluge of share sales to date have largely been in the form of placings and, more recently, rights issues.
CD&R’s investment in SIG would also turn on its head what many private equity executives argue is an anachronistic perception of their industry, by actively assisting a publicly traded company with the deleveraging of its balance sheet.
City insiders believe that could provide a valuable template for private equity firms to re-equitise companies which have been forced to borrow money to survive the pandemic.
The price at which SIG is expected to sell the new shares was unclear on Thursday night.
In total, it could seek to raise roughly as much as its own market capitalisation of £160m from CD&R and other investors, one analyst suggested.
The buyout firm is likely to take a substantial minority stake in SIG, although it is not likely to be above the 29.9pc level at which a mandatory takeover offer would be triggered.
CD&R’s decision to back SIG – and a new management team led by Steve Francis – is likely to be interpreted as a significant vote of confidence in a company which has been rocked by a string of profit warnings.
While the construction sector has taken tentative steps towards resuming work following a partial lifting of lockdown measures, the prospects for the industry’s recovery remain hazy amid a wide range of forecasts about the severity of an impending UK recession.
Mr Francis, whose most prominent spell in business was at the helm of Patisserie Holdings following the discovery of an apparent fraud, was parachuted into SIG in February.
His appointment was made permanent in April.
CDR is said to have been impressed with his transformation plan for the company, which describes itself as the largest supplier of insulation products in Europe.
The US-based buyout firm is one of the world’s largest, and has invested hundreds of millions of pounds in British-based companies.
It recently took Huntsworth, the listed marketing services group, private, while in 2014 it took the discount retailer B&M Bargains in the other direction, floating it on the London stock market after a successful period as its controlling shareholder.
CD&R’s UK-based team includes Sir Terry Leahy, the former Tesco chief executive, and Vindi Banga, the former Unilever executive.
Banks including Bank of America Merrill Lynch, Canaccord Genuity, Jefferies, Lazard and Peel Hunt are all understood to be involved in the equity-raising.
Shares in SIG closed on Thursday at 28p, up 3.7% on the day but 80% lower than they were a year ago.
SIG and CD&R declined to comment.