American buyout firms Carlyle and Bain Capital are among a group of four private equity funds preparing second-round bids for British luxury paintmaker Farrow & Ball, several sources familiar with the situation said.

The other bidders are Bahrain investment firm Investcorp and Ares Private Equity, part of US-based Ares Management, the sources said on condition of anonymity because the process is confidential, said a report in the Gulf Daily News (GDN), our sister publication.

Farrow & Ball, which is advised by Rothschild, could be valued at about £250 million ($401 million), representing a multiple of 11 times its pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) of £23 million, the sources said.

Its owner European Capital, a private equity and debt investment firm, aims to have binding offers in by the end of November in an attempt to select a buyer before 2015.

However, the private equity bidders will first need to go through an interim round to table their offers ahead of a November 3 deadline to reduce the shortlist further, the sources said.

“It has been structured as a three-part auction to maximise value,” one of the sources said, adding that a private equity buyout is the most likely option because of lukewarm interest from industry peers.

The Dorset-based paint company founded by chemists John Farrow and Richard Ball in the 1930s earns the bulk of its revenue in Britain, serving the high-end interiors market with its range of decorative wallpaper and such quaintly-named paint shades as Cat's Paw, Mizzle and Charlotte's Locks.

Sold to European Capital in 2006 as part of a management buyout valued at £80 million, Farrow & Ball was put up for sale again this year in a process that initially attracted 15 preliminary offers, mainly from investment firms, one of the sources said.

Representatives at Carlyle, Bain Capital, Investcorp and Ares declined to comment. - TradeArabia News Service