Private Equity

Scout24 taken private in $6.4bn deal

BY Richard Summerfield

Private equity firms Hellman & Friedman and Blackstone have agreed to acquire German digital marketplace company Scout24 in deal worth $6.4bn, including debt.

The deal, which will be the largest ever PE buyout of a German company, is subject to a minimum acceptance threshold of 50 percent plus one share, as well as customary closing conditions and merger control review. The transaction is being made through holding company Pulver Bidco, jointly controlled by funds advised by Hellman & Friedman and affiliates of Blackstone, and is expected to close in late May.

Scout24 accepted a revised €46 a share offer from the two US private equity firms after rejecting a €43.50 per share offer in January. The offer represents a 27.4 percent premium to the unaffected share price of €36.1 on 13 December 2018 and a 24.4 percent premium to the unaffected three month volume weighted average share price of €37. The offer values Munich-based Scout24 at almost 18 times 2019 earnings before interest, taxes, depreciation and amortisation (EBITDA).

“We believe this is an attractive offer with a substantial premium, high transaction certainty and a strategic value-add for the company,” said Hans-Holger Albrecht, chairman of Scout24.

“Hellman & Friedman and Blackstone are known to Scout24 as trusted and long-term partners given their prior ownership and familiarity with the company,” said Tobias Hartmann, chief executive of Scout24. “The terms of the offer represent an attractive opportunity for a highly strategic partnership that recognises the quality of the Scout24 platform, its employees, customers and partners. I am delighted about our joint long-term vision and ambition to turn Scout24 into a leading European digital player.”

Scout24 was previously owned by Hellman & Friedman, which acquired a controlling stake from Deutsche Telekom in 2013 for €1.5bn before listing the business in 2015, valuing it at €3.2bn. KKR sold a 50 percent stake in the business to private insurance group Swiss Mobiliar in 2016.

Hellman & Friedman and Blackstone are believed to have defeated rival PE firms to secure Scout24, including EQT Partners, Silver Lake and KKR & Co.

News: Private equity firms win over Scout24 with improved $6.4 billion bid

Investor group acquires Ultimate Software in $11bn deal

BY Fraser Tennant

In a move which takes a global provider of human capital management (HCM) into private ownership, Ultimate Software is to be acquired by an investor group led by private equity firm Hellman & Friedman in a transaction valued at approximately $11bn.

Under the terms of the agreement, all of Ultimate’s stockholders will receive $331.50 in cash for each share of the company’s common stock. Ultimate’s board of directors has unanimously approved the transaction and has recommended that stockholders vote in its favour.

Founded in 1990, Ultimate Software is a leading global provider of cloud-based human capital management and employee experience solutions, with more than 48 million people records in the cloud. The firm delivers HR, payroll, talent, and time and labour management, as well as HR service delivery solutions.

“This transaction will bring meaningful benefits to our employees and customers – both in the long and short terms,” said Scott Scherr, chief executive and founder of Ultimate. “It will also allow us to make additional, prudent investments in our products and services so that our customers will benefit from our ability to bring new features and services to market more quickly, while still enjoying the same high level of service.”

Upon completion of the transaction, Ultimate will continue to operate under the leadership of Mr Scherr and the existing senior management team. The privately held company will be owned by Hellman & Friedman in partnership with significant investors Blackstone, GIC, Canada Pension Plan Investment Board (CPPIB) and other investors, including JMI Equity.

“Ultimate’s impressive track record of growth is built on the outstanding quality of its software and its dynamic and motivated employees,” said David Tunnell, a partner at Hellman & Friedman. “The company deeply understands the essence of human capital management, having itself been recognised with numerous best workplace awards from leading publications for its exceptional mission-driven culture. We look forward to building on Ultimate’s successes, working along with our investment partners.”

The acquisition is expected to close in mid-2019, subject to stockholder approval and other customary closing conditions, including regulatory approvals.

News: Ultimate Software agrees to $11 billion buyout by investor group

 

Network Rail agrees to sell the arches in £1.5bn deal

BY Fraser Tennant

In a £1.5bn deal that will help fund railway upgrade plans, bring major improvements for passengers and reduce funding burden on taxpayers, Network Rail has agreed to sell its commercial estate portfolio to property company Telereal Trillium and investment firm Blackstone Property Partners.

Upon completion of the transaction, Telereal and Blackstone will hold equal ownership stakes and intend to be long-term owners of the estate. Both parties have adopted a ‘tenants first’ approach, cemented in a tenants’ charter, which offers a commitment to engage with all tenants and communities in an open and honest manner.

Network Rail launched the sale of its commercial estate in November 2017. The portfolio consists of approximately 5200 properties, the majority of which are converted railway arches. The sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway.

Proceeds from the sale will help fund the railway upgrade plan, which is bringing 170,000 seats into major cities, 6400 extra train services and 5500 new train carriages – a 30 percent increase in capacity.

“This deal is great news,” said Sir Peter Hendy, chairman of Network Rail. “For tenants it will mean significant commitment and investment, and for passengers and taxpayers it will mean massive, essential improvements without an extra burden on the public purse.”

Both Telereal and Blackstone have long and successful track records of operating large commercial estates across the UK. Telereal will oversee the day-to-day property management of the portfolio.

“The arches portfolio is a unique and vital part of the UK economy,” said Graham Edwards, co-founder and chairman of Telereal. “We are tremendously excited by the prospect of working with its entrepreneurial tenant base.”

James Seppala, head of European Real Estate at Blackstone, added: “The portfolio is unique in the role that it plays in stimulating economic activity, growth and prosperity, in particular among SMEs and local communities.”

Mr Hendy concluded: “This has been a very thorough, detailed and complex process and we are pleased we are now in a position to announce Telereal Trillium and Blackstone Property Partners as the new owners of the commercial estate.”

News: Network Rail sells $2 billion property portfolio to fund railway improvements

Canadian PE and VC investment divergent in H1 2018

BY Fraser Tennant

Private equity (PE) and venture capital (VC) investment in Canada has been divergent in the first half (H1) of 2018, with activity trending downward and upward respectively, according to a new report by the Canadian Venture Capital & Private Equity Association (CVCA).

In its ‘VC & PE Canadian Market Overview H1 2018’, the CVCA notes that $7.6bn was invested across 146 PE deals in Q2, bringing the year-to-date (YTD) total to $14.5bn across 288 deals. Much of this investment was due to two mega deals which made up 69 percent of total dollars invested. In comparison, mega deals made up 51 percent of dollars invested in H1 2017.

Further key findings in the Canadian PE investment space include a sharp drop in the number of exits in H1 2018, with only 41 exits ($10.5bn) compared to 152 exits ($11.5bn) in H1 2017.

“Canadian PE appears on pace from previous years, however on the dollar side it is increasingly driven by significant deals, suggesting the levels are a bit more tenuous,” said Mike Woollatt, chief executive of the CVCA. “In the absence of a few large deals, activity in the Canadian PE market is being driven substantially by smaller deals as activity shifts to categories with typically smaller deal sizes.”

Unlike PE, VC investment is on an upward trajectory and shows no signs of slowing for the remainder of 2018. Indeed, almost $1bn was invested over 166 deals in Q2, bringing the year-to-date (YTD) total VC investment to $1.7bn – 7 percent higher than H1 2017. Moreover, Q2 2018 is the third time since January 2017 where VC investment in Canada has surmounted $1bn.

Additional key findings in the Canadian VC investment space include an average deal size of $6m, which represents a 28 percent increase from the previous quarter and 13 percent higher than the average deal size in the five-year period between 2013 and 2017 ($5.3m).

“Innovation in Canada is enjoying the best VC investment climate in well over a decade,” continued Mr Woollatt. “We are consistently observing an increase in size and volume of deals at all stages, plus, a welcome resurgence in exits. We are bracing for 2018 to be another record year.”

Report: VC & PE Canadian Market Overview H1 2018

EQT gets SUSE

BY Richard Summerfield

Private equity firm EQT Partners is to acquire British software company Micro Focus International’s Linux operating system SUSE enterprise software business for around $2.5bn, subject to shareholder approval and customary closing conditions.

The acquisition will be financed by the EQT VIII fund. Micro Focus will reportedly use some of the proceeds of the sale to reduce debt and may return some money to shareholders.

SUSE has been part of Micro Focus since 2014 when the company acquired The Attachmate Group for $2.35bn. At that time, SUSE represented just over a fifth of The Attachmate Group’s revenue. In the year to end April 2017, SUSE generated revenue of $303m and adjusted operating profit of $98.7m, according to Micro Focus  The EQT fund is paying a multiple of 26.7 times adjusted operating profit of the unit for the 12 months to end October 2017.

“Today is an exciting day in SUSE’s history,” said Nils Brauckmann, chief executive of SUSE. “By partnering with EQT, we will become a fully independent business. The next chapter in SUSE’s development will continue, and even accelerate, the momentum generated over the last years. Together with EQT, we will benefit both from further investment opportunities and having the continuity of a leadership team focused on securing long-term profitable growth combined with a sharp focus on customer and partner success. The current leadership team has managed SUSE through a period of significant growth and now, with continued investment in technology innovation and go to market capability, will further develop SUSE’s momentum going forward.”

“We are excited to partner with SUSE’s management in this attractive growth investment opportunity,” said Johannes Reichel, partner at EQT Partners and investment advisor to EQT VIII. “We were impressed by the business’ strong performance over the last years as well as by its strong culture and heritage as a pioneer in the open source space. These characteristics correspond well to EQT’s DNA of supporting and building strong and resilient companies, and driving growth. We look forward to entering the next period of growth and innovation together with SUSE.”

“It was clear from the outset that the SUSE Business was an outstanding business with great people, great customers and fantastic products in a vibrant and dynamic market,” said Kevin Loosemore, executive chairman of Micro Focus.

SUSE believes that the sale to Swedish-based EQT will help finance the next stage in its expansion, allowing the company to hire additional software engineers.

News: UK's Micro Focus sells SUSE software business to EQT for $2.5 billion

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