Providence Equity-backed Altegrity Inc, which owns the provider of background checks for the U.S. government that vetted former spy agency contractor Edward Snowden, has revived talks to sell its unit that screens private-sector employees, two people familiar with the matter said.
Ares Management LLC, one of the private equity firms that held talks with Altegrity last year about a deal, has resumed discussions recently about the possibility of acquiring the unit, which is called HireRight, the people said.
Altegrity, owned by private equity firm Providence Equity Partners LLC, was originally seeking as much as $1 billion for HireRight, people familiar with the matter told Reuters in July.
One of the people said Altegrity was expected to have lower price expectations this time because its finances are under increasing pressure, partly due to federal budget cuts that have hit its government employee and contractor screening unit USIS.
It is uncertain whether an agreement can be reached and it could not be learned whether Altegrity was in discussions with other parties over the sale of HireRight.
Altegrity’s latest efforts to sell HireRight come as USIS is being accused by the U.S. Justice Department of having filed at least 665,000 flawed background checks between March 2008 and September 2012.
USIS also vetted Aaron Alexis, the technology contractor who killed 12 people at the Washington Navy Yard in September. The U.S. government’s lawsuit is not about the firm’s review of Alexis or Snowden, who is wanted by the U.S. government for leaking documents about the surveillance programs at the National Security Agency.
The sources spoke on condition of anonymity because the talks about HireRight are confidential. Providence and Ares declined to comment. An Altegrity spokesman declined to comment on the potential sale of HireRight but reiterated the company’s position that the U.S. Justice Department’s allegations relate to a small group of individuals and that the company has taken steps to ensure the quality of its work and adherence to standards.
Even before fraud charges against USIS were filed last week, Altegrity was under pressure to bolster its balance sheet and had hired Evercore Partners Inc (EVR.N) to advise on a possible recapitalization, another source familiar with the matter said earlier this month.
Last April, Moody’s Investors Service said in a research note that more than $1 billion of Altegrity’s $1.8 billion publicly rated debt matures in February 2015, presenting a significant refinancing challenge for the company.
Unlike USIS, which is the largest private provider of federal government background checks in the United States, HireRight focuses on private-sector employers and provides employee background checks, as well as drug and health screening for companies.
Irvine, California-based HireRight screens more than 6 million applicants annually and counts about 50,000 employers as customers, according to its website.
Providence bought Altegrity in 2007 for $1.5 billion from Carlyle Group LP (CG.O) and Welsh, Carson, Anderson & Stowe. Altegrity also expanded its intelligence and security consulting business through its $1.13 billion acquisition of Kroll in 2010.
(Reporting by Greg Roumeliotis. Additional reporting by Soyoung Kim in New York; Editing by David Gregorio)Get your FREE trial or subscribe now to Buyouts to find new deal opportunities, super-charge your fundraising efforts and track top managers.