Buyout firms circle around Brazil's Mills Estruturas

Several private equity firms could be looking to acquire publicly traded Brazilian infrastructure services provider Mills Estruturas e Serviços de Engenharia SA, according to sources familiar with the sector in Brazil.

One reason Rio de Janeiro-based Mills, which offers engineering services and equipment rental to complex infrastructure projects, may be in high demand is sports. Brazil is preparing to host the World Cup in 2014 and the Olympics in 2016, two events that require the country to modernize its infrastructure.

The company posted net revenue of 879.3 million reais ($440 million) in 2012, up from R$677.6 million in 2011. It also posted Ebitda of R$358.4 million, up from R$238.1 million the previous year.

On Monday, Mills shares were trading at R$30.

Among the private equity firms that have looked at Mills are Rio Bravo Investimentos, GP Investments Ltd., Patria Investimentos, Advent International and 3i Group plc, sources said. While 3i declined to comment, the other firms did not immediately return calls for comment. Mills was not available for comment as of press time.

It is not known if the potential bidders are eyeing the company as a whole or if they want to acquire a stake in Mills. One source estimated that if the company is sold as a whole, it could garner 1.0 to 1.5 times net revenue, which would value Mills at almost $660 million.

However, other sources said it is likely the eventual buyer will take a minority stake in the company.

Mills largest shareholder, Nacht Participaçoes SA, cut its stake in the company to nearly 21.8% from 39% in October, according to Bloomberg data.

Other major shareholders are Snow Petrel SL, which holds 14%, and directors of the company, who hold 2.9%.

"Mills has grown tremendously. It is a great company in a great business and its share price has done very well. I would not be surprised if Nacht were the seller [of its stake], given how well the stock has performed," a source familiar with the company said.

In fact, not only has Mills posted record-high net revenue and Ebitda for the past two years, its stock price has jumped 161% since it went public at R$11.50 per share in April 2010, raising R$686 million.

In 2007 the Nacht family, which founded Mills in 1952, sold a 28% stake in the company to private equity firm Axxon Group and private investment in public equity investor Investidor Profissional, which helped take the company public on the Bovespa in 2010.

As of February 2011, Investidor Profissional still held a small stake, according to the latest data available from Bloomberg, but Axxon Group appeared to no longer be a shareholder. The firms could not be reached for comment.