Teachers' and KIRKBI make EUR 500 million equity investment in ISS
Global long term investors Ontario Teachers' Pension Plan (Teachers') and KIRKBI Invest A/S have agreed to invest EUR 500 million (approximately DKK 3,721 million) in ISS, a leading global provider of facility services. The current owners, funds advised by EQT Partners ("EQT") and GS Capital Partners funds ("GSCP"), are not selling any shares as part of the transaction, and will remain majority owners of ISS.
"The board of directors of ISS is very pleased to welcome such respected and successful long term investors to ISS. This is a testament to the strength and attractiveness of ISS as an investment opportunity. Together with our two majority owners, the board will work closely with the new investors on ISS' value creation. ISS is on track to significantly deleverage ahead of an IPO within a few years," said Ole Andersen, Chairman of ISS A/S.
"We have come a long way in our transformation over the last years, and this new investment, is a step further on the journey of making ISS the world's leading service company for our customers and for our more than 530,000 employees. We believe that ISS is the only company which has the platform from which we can integrate and self-deliver a complete set of facility services across the globe - recently proven by two of the largest contract wins in the history of our Company. This new investment will further strengthen our Company's commercial and financial position," said Jeff Gravenhorst, Group CEO of ISS A/S.
"ISS is a global leader in the worldwide facility services industry. We see excellent opportunities to continue growing revenues as ISS is well placed to capture new customers and to provide integrated solutions to them," said Jo Taylor, Teachers' Private Capital Vice-President and head of Teachers' London office. "Management is experienced, with deep industry knowledge and has put the company on the right strategic path. We look forward to helping ISS expand successfully in both developed and emerging markets, and to introduce the executive team to the Teachers' international network."
"We have been following the performance of ISS for several years. ISS is a well-run company with strong values and leadership principles. We believe ISS is well positioned for further growth, particularly in emerging markets," said Søren Thorup Sørensen, CEO of KIRKBI A/S.
According to the agreement, subject to closing, Teachers' will invest approximately DKK 2,605 million and KIRKBI Invest A/S approximately DKK 1,116 million. The new investors will own approximately 26% of the ultimate holding company of ISS, with funds advised by EQT and by GSCP continuing to hold a majority interest in the business. The final price corresponds to DKK 105 per share in ISS A/S.
The proceeds from this investment are expected to be used to significantly deleverage the company by repaying the 11% Senior Notes due 2014 after the December 2012 call date.
Simultaneously with announcing this major investment, ISS is also releasing a trading update with preliminary results for the first six months of 2012.
Trading Update: ISS on track to deliver a solid 2012 result
ISS today announces preliminary results for the period 1 January - 30 June 2012 as an update on the Group's performance in the current year, ahead of the release of the Interim Report for the period 1 January - 30 June 2012.
ISS experienced a good start to 2012 by demonstrating healthy organic growth, strong cash conversion, and operating profit in line with last year, although operating margin was 4.9% for the first six months of 2012 compared with 5.1% for the same period of 2011.
"In spite of the challenging macro-economic conditions, particularly in the Mediterranean countries, ISS is well on track to deliver a solid 2012 result in line with our expectations. We recently won major new contracts with Barclays Bank and Novartis and we have a strong pipeline of international and national customers, which gives us confidence that the organic growth and margin development in the second half of the year will put us within our outlook guidance," said Jeff Gravenhorst, Group CEO for ISS A/S.
Group revenue amounted to DKK 39.1 billion in the first six months of 2012, an increase of 1% compared with the same period in 2011, driven by organic growth of 2.2% and a positive effect from exchange rate movements of 1% which was partly offset by the successful divestment of non-core activities amounting to 2%.
All regions except the North America and Pacific regions delivered a positive organic growth rate including Asia with a double-digit organic growth rate.
Operating profit before other items amounted to DKK 1,904 million in the first six months of 2012 compared with DKK 1,974 million in the same period in 2011. Operating profit was DKK 1,793 million, down from DKK 1,845 million in the comparable period of 2011.
Profit before goodwill impairment/amortisation of customer contracts amounted to DKK 489 million for the first six months compared with DKK 408 million in the same period last year.
The LTM (Last Twelve Months) cash conversion for June 2012 was 99%, as a result of a strong cash flow performance in all regions reflecting a continuing focus on securing payments for work performed and remaining cautious in countries with increasing financial turmoil.
While the capital injection does not change the financial outlook for ISS for 2012 – it is expected to positively impact the financial position and net result of ISS. The new capital injection will lower ISS' leverage ratio considerably with seasonality adjusted pro forma leverage for June 2012 dropping from 5.86x to 5.15x.
ISS is scheduled to announce consolidated results for the period 1 April - 30 June 2012 and for the first six months of 2012, Wednesday 22 August 2012.
Chairman of the Board
With $117.1 billion in assets as of December 31, 2011, the Ontario Teachers' Pension Plan is the largest single-profession pension plan in Canada. An independent organization, it invests the pension fund's assets and administers the pensions of 300,000 active and retired teachers in Ontario. For more information visit www.otpp.com.
About KIRKBI Invest
KIRKBI Invest is owned by KIRKBI A/S which is the Kirk Kristiansen Familiy's holding- and investment company with activities within 3 areas: 75% ownership of LEGO, 36% ownership of Merlin Entertainments and among other things a number of investments in bonds, listed and unlisted equities, and real estate. See also www.KIRKBI.com.
EQT is the leading private equity group in Northern Europe with close to EUR 18 billion in raised capital and multiple investment strategies. Together with a superior network of independent Industrial Advisors, EQT implements its investment strategy by acquiring or financing good medium-sized to large companies in Northern and Eastern Europe, Asia and the United States, supporting their development into leading companies. Development is achieved by an industrial strategy with focus on growth. Since inception, EQT has invested more than EUR 11 billion in around 100 companies and exited close to 50. EQT-owned companies have more than 550,000 employees. EQT Partners, acting as Investment Advisor to the managers of each EQT fund, has around 120 investment professionals with an extensive industrial and financial competence. EQT Partners and its affiliates have offices in Copenhagen, Frankfurt, Helsinki, Hong Kong, Oslo, London, Munich, New York, Shanghai, Singapore, Stockholm, Warsaw and Zurich.
About GS PIA
Since 1986, the Goldman Sachs Principal Investment Area ("GS PIA") and its predecessor business areas have raised 17 private equity and principal debt investment funds aggregating over $82 billion of capital (including leverage). A global leader in private corporate equity investing, GS PIA focuses on large, high quality companies with strong management in order to fund acquisition or expansion across a range of industries and geographies. Since 1986, GS PIA and its predecessor business areas have invested $85 billion through a combination of external investment funds and firm capital. Founded in 1869, Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. For more information, please visit www.gs.com/pia
The ISS Group was founded in Copenhagen in 1901 and has grown to become one of the world's leading Facility Services companies. ISS offers a wide range of services such as: Cleaning, Catering, Security, Property and Support Services as well as Facility Management. Global revenue amounted to DKK 78 billion in 2011 and ISS now has more than 530,000 employees and local operations in more than 50 countries across Europe, Asia, North America, Latin America and Pacific, serving thousands of both public and private sector customers. For more information on the ISS Group, visit www.issworld.com.
Kenth Kærhøg, Head of Group Communications, +45 38 17 62 05
Barbara Plucnar Jensen, Head of Group Treasury, +45 38 17 62 60
Frederikke Tømmergaard, Head of Communications, +45 5215 937
Andrew Mitchell or Will Carnwath, +44 20 7404 5959
Johan Hähnel, Head of Communications, +46 70 605 63 34
Jo Carss, Media Relations, +44 207 774 4102
Director, Communications and Media Relations
Ontario Teachers' Pension Plan