ISS to Raise $1.5 Billion in IPO as Goldman, EQT Sell Stakes

ISS Holding A/S, the Danish facilities management company, plans to sell shares to raise 8 billion kroner ($1.5 billion) to repay debt, in the country’s biggest initial public offering in 20 years.

The IPO will consist primarily of an issue of new shares and will also involve a partial sale of stakes by funds advised by Goldman Sachs Capital Partners and EQT Partners AB, Copenhagen-based ISS said today in a statement. Owners Ontario Teachers’ Pension Plan and Kirkbi A/S, the investment company owned by Lego billionaire Kjeld Kirk Kristiansen, won’t sell shares, ISS said.

“The intended IPO is expected to support our operational strategy, advance our public and commercial profile, provide us with improved access to public capital markets and a diversified base of new private and institutional shareholders,” Chief Executive Officer Jeff Gravenhorst said in the statement.

The world’s largest cleaning-service provider is paying off creditors after spending 10 billion kroner between 2006 and 2010 to expand through acquisitions, pushing debt at its peak to more than seven times operating profit, according to Moody’s Investors Service. The “high leverage” is constraining ISS’s ability to increase profits just as takeovers’ contribution to growth stagnates, the rating company said in December. It rates ISS B1 with a positive outlook.

Biggest IPO

“This is obviously a positive because it will lead to a further deleveraging of the company,” Knut Slatten, a Paris-based analyst at Moody’s, said today by phone.

The IPO is poised to be Denmark’s biggest since the government sold a stake in phone operator TDC A/S for 19.6 billion kroner in 1994. EQT and Goldman Sachs’s private-equity arm acquired ISS for 21.9 billion kroner in 2005.

ISS cut its debt last year by 3.3 billion kroner to 22.7 billion kroner, mainly as a result of divestments. The company had 2013 sales of 78.5 billion kroner, a 4.3 percent increase on 2012 on an organic basis, driven by western European growth of 5 percent and “double-digit” growth in Asia. Operating profit before items fell by 2.2 percent to 4.3 billion kroner. Organic growth excludes the effects of acquisitions and currency fluctuations.

ISS forecast revenue growth of 3 percent to 4 percent this year, assuming constant foreign-exchange rates and before the effects of acquisitions and divestments. The operating margin is forecast to be above the 5.5 percent it had last year.

The offering will consist of both new and existing shares. Nordea Bank AB, Goldman Sachs Group Inc. and UBS AG are joint global coordinators, ISS said. The three banks will also act as joint bookrunners, together with Barclays Plc and Morgan Stanley. Danske Bank A/S, SEB AB and Carnegie have been appointed co-lead managers. Lazard is acting as financial adviser to ISS.

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