Nielsen’s PE Backers Look to Sell Down Holdings

TV ratings firm Nielsen Holdings has launched a follow-on offering that will allow its private-equity backers to sell as much as $760 million worth of shares, according to Reuters‘ publication IFR. The offering will allow private equity backers Blackstone, Carlyle, KKR, Thomas H. Lee, Hellman & Friedman, AlpInvest Partners and Centerview Capital to sell down their collective stake from 75.1% to as low as 67.1%.

Reuters – TV ratings firm Nielsen Holdings has launched a much-anticipated follow-on offering that will allow its private-equity backers to sell as much as $760 million worth of shares.

The 25 million all-secondary offering, nearly 7% of outstanding, comes almost 14 months after the company went public, much later than several recent IPOs that have wasted little time coming back to market.

The deal is expected to price Tuesday night, getting in ahead of several large follow-ons in the coming weeks.

As a well-known seasoned issuer, Nielsen can price the follow-on immediately, whereas more recent IPOs looking to price follow-ons (Zynga, Michael Kors) face a longer SEC approval process.

As with Nielsen’s IPO, a large syndicate of banks led by JP Morgan and Morgan Stanley is underwriting the share sale.

The offering will allow private equity backers Blackstone, Carlyle, KKR, Thomas H. Lee, Hellman & Friedman, AlpInvest Partners and Centerview Capital to sell down their collective stake from 75.1% to as low as 67.1%. Insiders have a agreed to a standard lock-up restricting them from selling shares for 90 days after the offering.

Despite underperforming the overall market, Nielsen has performed reasonably since its $1.8 billion IPO in January 2011 priced at $23 a share. The stock has since risen to $30.40 (Friday’s close), buoyed by its still dominant market position in US TV ratings, some big opportunities in Internet ratings and growth offshore.

The follow-on is a favourable development in the sense that analysts believe investors had stayed on the sidelines due to low liquidity, even as Nielsen has delivered better-than-expected earnings.

The stock was down more than 4% after this morning’s announcement, but rebounded by the middle of the session to trade almost flat.

Some analysts recently speculated Nielsen would raise equity to pay down debt, but that is not the case this time.

The stock trades at around 10 times 2012 Ebitda and has net debt/Ebitda of around four times, high but down markedly from nine times in 2006 after the $9.7 billion LBO.

The debt calculation includes a $250 million two-year mandatory convertible bond due in February 2013, issued at the time of the IPO.

The company targets a 0.5 times reduction in its debt levels each year, aiding earnings per share. At this stage it seems content to gradually bring down debt rather than issue new shares.