Bain, Advent IPO Candidate Nets Says Debt Reduction Top Priority

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The Danish payment processing firm Nets Holding A/S, which is owned by Bain Capital, Advent International and ATP, says it wants to cut its debt before proceeding with an initial public offering.

While Danish media have speculated the company’s owners were pushing for an IPO as early as mid-year, Nets Chief Executive Officer Bo Nilsson talked down the urgency of the move.

“We don’t know when the IPO will come,” he said in an interview in Copenhagen on Monday. “Let’s say it comes in two years. Then at that point we would have paid down debt and so then the equation between money raised for the company and for the shareholders may have changed. But I suspect that even in the near future, there will be definitely a need to raise money for the company.”

Nets was bought by Bain, Advent and Danish pension firm ATP in 2014 for a total of 17 billion kroner ($2.6 billion) from a group of 186 Scandinavian banks. The owners, who are being advised by Deutsche Bank AG and Morgan Stanley, may seek an equity valuation of about $4 billion in an IPO, Bloomberg reported in February. Nilsson declined to comment on that figure.

“To the extent that demand for shares is very strong if there’s an IPO, if that’s the route we go down, then I think shareholders will also sell some shares,” Nilsson said. “But the priority for me as a leader is to reduce leverage.”

Nets’ debt more than tripled last year after the company obtained new senior debt totaling 1.79 billion kroner to finance acquisitions.

Nets is one of a number of payments processing companies whose owners have looked to exit. Vista Equity Partners sold Transfirst to Total Systems Services Inc. for about $2.35 billion in January, while Worldpay Group, also backed by Advent and Bain, sold shares in London in October after rebuffing buyout offers.

“If you look at Worldpay, Worldpay came out with a debt-to-Ebitda ratio of 3.75. With the profit that we have, if we were to come with that level, the profit we have in terms of cash flow, that would come down very quickly,” Nilsson said. “So I wouldn’t be surprised, as our owners are the same as Worldpay’s owner, that it would be in that region.”

Nets had non-current interest-bearing debt of 2.28 billion kroner in 2015, compared with 635 million kroner a year earlier. Its net cash flow for the year reached 559 million kroner, compared with a 151 million-krone loss in 2014. Revenue grew 4.4 percent 6.8 billion kroner, while net income surged 59 percent to 1.04 billion kroner.

“We have taken on more debt as we have invested,” Nilsson said. “Leverage has gone down, because we have increased earnings, but the absolute amount of debt has increased.”

“To raise money for the company is always a primary goal, even for our investors,” Nilsson said. “An IPO is both raising money for the company and also, to the extent the market is there, it will allow existing shareholders to realize returns. I would expect them to look at that, but no decision has been made yet.”

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