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June 14, 2007 9:49 pm
Danish cleaning services company ISS, Europe’s fifth largest private-sector employer with a staff of 410,000, is to be brought back to the market by its private equity owners just two years after it was acquired.
The company was purchased in March 2005 for $3.9bn by EQT, the private equity arm of Investor, the holding company of Sweden’s Wallenberg family, and Goldman Sachs Capital Partners, the bank’s private equity unit.
The two owners announced on Thursday they were considering an initial public offering of part of the company within the next 12 months after ISS “significantly outperformed the investment plan”.
People close to the transaction declined to comment specifically on how much the company is worth, but said an estimate of about double the $3.9bn paid two years ago was reasonable.
However, the prospect of private equity investors making hefty returns in such a short period of time could reignite tension with the company’s bond-holders.
The acquisition of ISS generated considerable controversy after a group of bondholders threatened legal action over the scale of the debt involved. “We went from a 80-20 situation to a 20-80 situation,” said Jorgen Lindegaard, ISS’s chief executive. ISS bonds lost their investment grade ratings and plunged more than
20 per cent in value after the acquisition and Standard & Poor’s, the rating agency, downgraded the company’s rating six notches to B+.
Mr Lindegaard insisted such issues were now behind the firm, pointing out that ISS conducted a €1.7bn ($2.3bn) bond issue recently that attracted no controversy.
Nevertheless, the ISS transaction captured the frustrations of many bond-holders in similar leveraged buy-outs where new debt is issued.
Mr Lindegaard attributed the company’s recent rapid growth in part to not being listed. “I have had time to look after operations, this is one of the major differences to being unlisted rather than listed.” He expressed confidence he would be able to maintain this focus once the company was relisted.
Goldman Sachs and EQT expect to remain “substantial shareholders” in the company. No decision has been made on how much of the firm they wish to sell and no dates set for the start of any roadshow or bookbuilding.
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