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MAN, the listed German industrial group, is mulling strategic options for its industrial plant building division MAN Ferrostaal, a source with knowledge of the situation told mergermarket.

MAN declined to comment on the claims made by two industry sources that the company had been quietly reviewing the future of Ferrostaal, which has a turnover of EUR 1.5bn, merely saying that MAN saw ”no reason to change the company structure,” and pointing to the company’s declared commitment to strengthen Ferostaal in other markets as well as through partnerships. But the source with knowledge of the company suggested that the review, believed to be led by Goldman Sachs, would not necessarily lead to a sale of the company.

However, an industry source claimed that MAN has discussed the company’s strategy as to the possibility of selling MAN Ferrostaal.

Separately a market observer said he had heard the company had already held informal talks with potential buyers, rumoured to include the Nordic oil company StatoilHydro. StatoilHydro declined to comment.

An analyst who follows the company estimated MAN Ferrostaal would fetch at least EUR 1.2bn if sold in its entirety, but speculated that a more likely option would be the packaging up of the company into its various divisions, which would then be sold to interested buyers.

MAN Ferrostaal’s main business is building large-scale plants and ”providing industrial solutions - worldwide,” although the company does not make equipment itself. The analyst said this could be roughly broken down into project development and management, systems integration and its more recent foray into the solar energy and biofuel markets.

Jefferies managing director Richard Markus, who has experience with such deals, said the valuation of the plant engineering businesses could be challenging because due to the nature of such businesses there often could be a large quantity of bonds outstanding. ”Banks and insurance companies will want to see probably about 20-30 percent equity/cash to back up the bonds,” Markus said. ”Any purchaser will want to use this to reduce the price he pays. The seller will see this differently as in reality these things hardly never get called outside insolvency.”

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