COPENHAGEN Denmark's ISS ISSHOI.UL is looking to raise around $2.4 billion from a stock market listing in which its private equity owners will keep their shares in the outsourcing group and use the funds to pay down debt.
The initial public offering (IPO) on the Copenhagen bourse would be Europe's biggest so far this year.
The company, one of the world's biggest private-sector employers with more than 500,000 workers, said on Thursday its planned 13.3 billion Danish crown ($2.4 billion) float would be made up almost entirely of new shares.
Last month, ISS's owners Goldman Sachs (GS.N) and Swedish buyout firm EQT broke off talks on an $8.5 billion takeover by private equity firm Apax after they disagreed over the price. An IPO then looked likely, but the owners were expected to at least partially exit the business.
A source close to the deal said that less than 5 percent of the shares offered would be existing, sold as part of a management share scheme.
Reporting its 2010 full year results on Thursday, ISS said revenue had grown 7.3 percent from 2009 to 74.1 billion Danish crowns, driven mainly by growth in emerging markets, and predicted revenue growth of around 4 percent this year.
"We expect to spend about half a billion crowns per year on acquisitions, mainly in emerging markets," Chief Financial Officer Jakob Stausholm said on a conference call.
ISS, which operates in more than 50 countries, cleaning offices, cooking school meals, running hospitals and providing security for people and properties, has grown briskly in emerging markets, including the security market in India where in 2010 it acquired SDB Cisco Ltd with 27,000 employees.
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The company will use the share sale proceeds to reduce existing senior debt facilities, but not to refinance outstanding bonds, Chief Executive Jeff Gravenhorst said.
Senior debt facilities stood at 17.96 billion crowns at the end of 2010, making up 59 percent of ISS' total net debt.
The IPO would cut the firm's debt/EBITDA ratio to 3.5 times from 6 times, Stausholm told Reuters.
"By listing the company, owners de-leverage their risk on the investment and align (their) interests with new shareholders," he said.
The shares held by the private equity owners will be subject to a six month lock-up period after the listing.
The number of shares to be sold is yet to be decided, and will depend on the price and investor interest, Stausholm said.
Sources close to the deal declined to specify the size of the stake being sold but said the free float would be sizeable.
"There are not going to be any issues about liquidity," said one source.
The listing, which would have ranked number three in size in Europe last year, is expected to be completed mid-March, the sources said, with a price range likely around March 3.
Goldman Sachs's private equity arm and EQT bought ISS in a leveraged buyout in 2005. That deal valued the business at $5.3 billion including debt, according to Thomson Reuters data.
The Copenhagen bourse saw several private equity-backed flotations last year, swallowing the $2.1 billion IPO of Danish jewelry maker Pandora (PNDORA.CO) and a $2.2 billion re-listing by telecoms group TDC (TDC.CO) in the fourth quarter -- two of Europe's biggest equity offerings of 2010.
Goldman Sachs and Morgan Stanley are joint global coordinators on the offering, with Citigroup, Deutsche Bank, HSBC and Nordea joining them as joint bookrunners.
(Additional reporting by John Acher in Copenhagen and Kylie MacLellan in London; Editing by Andrew Callus and Elaine Hardcastle)
($1=5.492 Danish Crown)