(Reuters) – Nielsen Holdings B.V. plans to raise up to $1.75 billion in an initial public offering, becoming the latest private-equity backed company to sell shares into a fragile market.Nielsen is best known for its viewership ratings, which often determine the fate of TV shows. Its top 10 clients — who account for about 23 percent of its business — include Coca-Cola Co (KO.N), NBC Universal, Nestle S.A. (NESN.VX), News Corp (NWSA.O), Procter & Gamble Co (PG.N) and Unilever (ULVR.L).
The Dutch company was taken private in a $10-billion deal in 2006 by a group of private equity firms. Kohlberg Kravis Roberts & Co [KKR.UL] and Thomas H. Lee Partners [THL.UL] first approached management and formed the rest of the consortium. THL and KKR each have about 20 percent stakes, as do Blackstone Group (BX.N) and Carlyle Group [CYL.UL].
Among the others, Hellman & Friedman owns about 9 percent and AlpInvest Partners about 7 percent. The rest of the company is held by management team and other directors.
Nielsen, which is loaded down with debt, declined on Thursday to comment on how many shares would be sold, whether they would be newly issued, or the timing of the sale.
“Nielsen, albeit a premier name in global information and a go-to name by some of the biggest corporations, has shown flat revenue, continued losses and extraordinarily large debt. Coupled with an unusual number of private equity backers, this should translate to a tough sale,” said Scott Sweet, senior managing partner at IPO Boutique.
The U.S. market for initial public offerings has slowed, with many deals cut or shelved as investors protect their portfolios and wait to see if Europe’s debt crisis will stall economic recovery.
That hasn’t stopped private equity portfolio companies from starting the IPO process. Toys R Us last week filed to raise as much as $800 million. Hospital operator HCA Inc and Dutch semiconductor company NXP Semiconductors also recently filed to go public. Coffee chain Dunkin’ Donuts is also considering an IPO, analysts said.
Recent private-equity backed IPOs have flopped because they were seen as too highly leveraged exit vehicles for buyout firms.
Nielsen, which has lost money every year it has been private, made clear in its filing with regulators that the proceeds from the IPO would be used to help pay down debt that stood at nearly $8.6 billion as of March 31.
It also said that some proceeds would be used for general corporate purposes.
One big hurdle for the company is that it’s not making enough money to service a debt load it characterizes as “substantial.”
Indeed, Nielsen’s annual earnings before interest payments and taxes, or operating income, has ranged between $116 million and $420 million since 2007. That compares with the company’s interest expense, which has been at least $647 million a year.
While the company has long dominated the market for audience measurement — its ratings are the standard used by TV networks and advertisers to help determine commercial rates — it has lately faced some fresh competition and concerns that its data does not fully reflect new viewing patterns.
In one instance, a group of top media companies, including Time Warner Inc (TWX.N) and News Corp (NWSA.O), is devising new ways to measure audiences, taking into account major shifts in viewing habits, such as audiences using the Web and digital video recorders (DVRs) to watch programs at their leisure.
Nielsen paid $34 million in management fees to its private equity backers in 2007, 2008 and 2009 and is on track to pay an additional $12 million in 2010.
After the IPO, the management agreement will end. Even so, Nielsen will still owe the firms the money it would have otherwise paid them over the life of the contract, or around eight years.
J.P. Morgan Securities and Morgan Stanley are the lead underwriters of the IPO.