Re-investment in Visma

RNS Number : 6040F

HgCapital Trust PLC

28 April 2014

 



28 April 2014

HgCapital Trust re-invests in Visma in NOK 21 billion (£2.1billion) deal with KKR and Cinven

HgCapital Trust plc ("The Trust") and other institutional clients of HgCapital will re-invest in Visma Group Holdings ("Visma"), a leading software and BPO services business in the Nordic region, following a decision by leading global investment firm KKR to sell part of its majority holding in the group. HgCapital will invest £405m for a 31% stake in Visma, valuing the business at a total enterprise value of NOK 21 billion (£2.1 billion). HgCapital will be a co-lead investor in the new transaction structure, as Manager of its HgCapital 7 Fund and the Trust, alongside KKR and Cinven, who will each hold 31%. Cinven are committing capital to the business for the first time.  Completion of this transaction is subject to regulatory approval. 

The Trust, whose shares are listed on the London Stock Exchange, gives private and institutional investors the opportunity to participate in all HgCapital's investments alongside major institutions that are limited partners in its funds. This transaction will return estimated proceeds of £40.7 million to the Trust, representing an uplift of £8.8 million over the valuation of £31.9 million in the Net Asset Value ("NAV") at 31 March 2014, which was based on the Directors' valuation as at 31 December 2013. The Trust will contribute a total of up to £40.0 million to the re-investment in Visma, including a co-investment participation in addition to its commitment to invest in all Hg Capital 7 deals.

HgCapital initially invested £101 million in Visma in 2006 through its HgCapital 5 (2006 vintage) Fund. The Trust's share of this initial investment was £13.3 million, with a further £3.0 million invested between 2008 and 2010 to fund its proportion of further investment.  HgCapital sold a majority of its stake to KKR in late 2010, crystallising a substantial capital gain for its clients, with cash proceeds of £39.4 million returned to the Trust. HgCapital's clients retained a minority 17% shareholding in 2010, with HgCapital continuing to play an active Board role in the business.  Following a re-financing in 2013, the Trust received cash proceeds of a further £4.5 million.

The total return on all capital invested by HgCapital between 2006 and 2014 will generate an overall investment multiple of 5.2x original cost and a gross IRR of 34% for the Trust and investors in the HgCapital 5 Fund.  

HgCapital's re-investment in Visma is expected to generate further attractive returns for the Trust and investors in HgCapital 7 over an anticipated five to six year new ownership period. HgCapital 5 is selling its remaining stake in full, given the maturity of this investment in the context of the Fund's 2006 vintage and the longer (5-6 year) target hold period of the new investment. Visma gives investors ongoing exposure to the leading provider of mission critical accounting, resource planning and payroll software and related BPO services to small and medium-sized enterprises in the Nordic region.  HgCapital has known Visma and its management team since 2004 and will continue to support the business going forward, in order to grow revenues both organically and through acquisitions that will add further growth, as well as by driving further margin improvement.  HgCapital will continue to work with Visma's management in the ongoing transition of the company's software products to Software as a Service ('SaaS'). Visma is currently positioned as one of the leading and largest SaaS companies in Europe, with potential to accelerate this growth both through organic investment and further acquisitions.

Visma's performance over the eight years since 2006 has been consistently robust, which underpinned the decision to retain a minority stake in 2010, and which provides the conviction to re-invest in the business today.  Total revenues grew from NOK 2,306m in 2006 to NOK 6,452m in 2013, a compound annual growth rate of 16%; EBITDA increased from NOK 305m in 2006 to NOK 1,325m in 2013, a compound annual growth rate of 23%; it also completed more than 75 bolt-on acquisitions.  Over the same period, operating margins improved from 13% to 21%.  It is also worth noting that the number of employees increased from 2,512 to 5,648 since the Trust and other clients of HgCapital first invested.

In 2003, HgCapital's TMT team identified regulatory-driven, subscription-based software as an attractive sub-sector with scope for considerable growth over the following decade. The Trust and other clients of HgCapital have participated in thirteen investments in the regulatory-driven software space over the last decade.  Visma is also the fourth realisation by the TMT team over the last 15 months, following the recent exits of CSH, Epyx and Manx Telecom.  In aggregate, these realisations have produced an aggregate investment multiple of 3.3x original cost and a gross IRR of over 30%.  This transaction also represents the seventh full realisation from the 2006 vintage HgCapital 5 Fund which, following completion of this transaction, will have returned an overall realised multiple of 2.8x original cost and generated a gross IRR to the Trust and limited partners in the Fund of approximately 27%.  Nearly 160% of invested capital will also have been returned to the Fund's clients. 

The acquired stake in Visma also represents the third investment by the Trust and investors in the HgCapital 7 Fund, following the acquisitions of P&I and Ullink.

Based on the NAV at 31 March 2014, and adjusting for this transaction, the NAV of the Trust is estimated to increase to £449.3 million or 1,203.7 pence per share. Adjusting for the proposed dividend to be paid on 16 May 2014 (subject to shareholder approval) the NAV of the Trust is expected to be £438 million or 1,174.7 pence per share.

The Trust's liquid resources available for future deployment are estimated to be £85 million (19% of the 31 March 2014 NAV). The transaction will reduce the Trust's outstanding commitments to invest in HgCapital deals to approximately £235 million.

Commenting on the transaction, Roger Mountford, Chairman of HgCapital Trust plc said:

"The Trust's manager, HgCapital, has already delivered substantial returns to shareholders from investment in Visma and other software businesses across Europe.  As a permanent pool of capital, able to take long-term investment decisions, the Trust is well placed to maintain its stake in a business which looks set to continue to grow in value. Its long-term potential is demonstrated by the commitment to Visma that HgCapital, KKR and Cinven, three of the most experienced investors in this sector, are making through their investment. The Trust enables smaller investors to participate alongside them."

Nic Humphries, Managing Partner and Head of TMT of HgCapital said:

"HgCapital has been a partner for Visma over the past 8 years and the company is a highly successful example of our investment focus on companies with predictable revenues and high levels of intellectual property that provide platforms for growth significantly ahead of GDP growth. Our aim is to support management to grow industry champions and Visma is exactly that - a true 'Nordic Champion'. We are delighted to be backing the management going forward."

HgCapital's new investment from the Hg Capital 7 fund was advised by Arma Partners and White and Case.

Please find the text of a press release issued today by HgCapital announcing the transaction via the following link:

http://www.hgcapital.com/content/news-media/news.

- Ends -

For further details:

HgCapital
Stephen Bough	[phone]
HgCapital Trust
Roger Mountford	[phone]
Maitland
Peter Ogden	[phone]
Tom Eckersley	[phone]

About HgCapital Trust plc

HgCapital Trust plc is an investment trust whose shares are listed on the London Stock Exchange (ticker: HGT.L). The Trust is a client of HgCapital, giving investors exposure to a portfolio of high-growth private companies, through a liquid vehicle. New investments and existing portfolio companies are managed by HgCapital, an experienced and well-resourced private equity firm with a long-term track record of delivering superior risk-adjusted returns for its investors. For further details, please see www.hgcapitaltrust.com

Neither the contents of HgCapital's, HgCapital Trust's Visma's, KKR's nor Cinven's websites nor the contents of any website accessible from hyperlinks on the websites (or any other website) is incorporated into, or forms part of, this announcement.

 

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