News agencies reported on Tuesday that the private equity owners behind Interactive Data Corporation (IDC) might be considering a sale or an initial public offering (IPO). According to reports, Silver Lake Partners and Warburg Pincus would hope to make around $5.5 billion from the sale or IPO.
According to Reuters, the private equity firms hope the US financial information company would attract a valuation of over $5 billion, which would include debt. The firms hope to appoint financial advisers in the coming weeks. This would be another deal that would be made by using the dual-track process, which is becoming an increasingly popular among private equity firms. Under the process, firms explore both the possibility of a sale and stock flotation at the same time. IDC would be listed in the US stock. Neither firm have so far acknowledged the rumours.
Possibility of a Great Gain
The two firms could potentially make a great gain with the sale or IPO, if the valuation would reach what they are aiming for. The US private equity firms acquired the company in 2010 in a buyout deal from Pearson, the owner of Financial Times. That deal valued the company at $3.4 billion. Pearson received $2 billion for its 61%s stake. The private equity firms currently own 96% of the capital stock, with the remaining held by IDC’s management. It’s not sure whether the firms would sell all of their shares or continue as a minority shareholder.
IDC has reported slight result improvements in recent years. According to the Financial Times, the company announced its adjusted earnings before interest, tax, depreciation and amortisation in 2014 stood at $362 million. This was a 3% increase to earnings the year earlier. At the end of 2014, the company had total outstanding debt worth $2.2 billion.
Good results are largely driven by increase in global spending on financial data, analysis or news. Burton-Taylor, the consultancy group, said the spending in the sector increased by 4$ to $26.5 billion in 2014.
Plenty of Interest
If the private equity firms decide to go down a sale route, there might be a number of companies interested in IDC. Strategic bidders may include companies such as McGraw Hill Financial. But analysts at the Financial Times also note that the size of the deal “may put off some bidders as IDC’s value would make it quite big to absorb for its competitors”.
There have been quite a few big deals in the sector in the last few months. Verisk Analytics acquired Wood Mackenzie, the energy specialist, in a $2.8 billion deal earlier this year. That deal provided an exit for private equity firm Hellman & Friedman, which had bought the company in 2012.
Furthermore, Markit, the UK-based financial data provider, managed to raise $1.3 billion with its IPO in June last year. The company’s share price has continued to increase, with its market capitalisation currently standing at $4.8 billion.
It remains to be seen what route the private equity companies end up taking in the end. Whatever the result, it is beginning to look like most private equity firms prefer to go down the dual-track route when planning their exits. If you are looking for private equity deals, visit the DealMarket website.