Leonard Green & Partners is investing in Insight Global in a deal that will pay Ares Management a huge dividend, according to a source familiar with the situation and a March 31 report from Moody’s Investors Service.
Ares, a Los Angeles-based alternative-asset manager that acquired Insight Global in 2012, is retaining a stake in the company, the source said. Ares is selling less than 51 percent of Insight, a different source familiar with the situation said.
Crescent Capital, also of Los Angeles, is joining Leonard Green to buy equity in Insight Global from Ares and other shareholders, Moody’s said. The deal includes $800 million in debt, Moody’s said.
The Atlanta staffing firm is using the $800 million, along with cash on hand, to pay Ares, and other investors, a $685 million distribution, Moody’s said.
Insight is also seeking to amend an existing loan to allow incremental debt and a shareholder distribution, and to include additional permitted holders, Moody’s said.
Moody’s noted Insight Global’s high financial leverage and its aggressive financial policies that are characterized by “recurring debt-financed distributions to equity holders.”
The current $685 million dividend will be the third distribution Insight Global has paid since it was sold to Ares in October 2012, Moody’s said.
The deal will cause Insight Global’s debt-to-Ebitda leverage to hit 6x from about 4.9x as of Dec. 31, the ratings firm said. Insight Global’s ratings outlook is stable, Moody’s said.
“The proposed transaction is credit negative and demonstrates the company’s ongoing aggressive financial policies due to its willingness to increase debt to fund sizable shareholder distributions,” Moody’s said.
Insight Global provides long-term, short-term and temp-to-permanent technical-staffing services. The company produced about $1.5 billion in revenue in 2015, Moody’s said.
“Insight Global is doing great,” said the first source, who estimated the company was producing annual Ebitda of $180 million.
News of the transaction first appeared on the Federal Trade Commission website last week.
Green, which is fundraising, is using its sixth fund to invest in Insight, according to a March 25 FTC filing. Green Equity Fund VI closed at $6.25 billion in 2012.
The PE firm is currently fundraising for its seventh fund, which is seeking $8.5 billion, Buyouts Insider reported in January.
Ares acquired Insight Global in 2012. Financial terms weren’t announced but a third source said the deal was valued at more than $1 billion. Harvest Partners, the seller at the time, retained a stake in Insight Global.
Leonard Green, which has one office in Los Angeles, bid for Insight Global during a 2012 auction, sources said. With its current investment, Green would be the fourth PE firm to own Insight Global.
Ares and Leonard Green declined comment. Crescent, Harvest and Insight Global did not return calls for comment.
Action Item: Read the Moody’s report here
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