TPG, CPPIB and Leonard Green poised to make 2.6x from IMS Health

TPG, Canada Pension Plan Investment Board (CPPIB) and Leonard Green & Partners each stand to nearly triple their investment in IMS Health in three years.

IMS, which is expected to go public on Friday, plans to sell 65 million shares for US$18 to US$21 per share. The company is offering 52 million shares while selling stockholders are selling another 13 million, according to an SEC filing.

Founded in 1954, IMS provides prescription data to drug makers, medical device companies and government agencies. In 2010, TPG, CPPIB and Leonard Green acquired the company in a deal valued at US$5.2 billion, including roughly US$2 billion in debt. The sponsors committed to invest up to US$2.8 billion equity in the deal, SEC filings show.

The sponsors have received about US$2 billion in dividends. This includes a US$753 million distribution that IMS paid in 2013 to its stockholders, according to SEC filings. Another “one time” dividend came in October 2012 when IMS issued a US$1.19 billion payout to shareholders, a Moody’s Investors Service report said.

Here’s how the deal has worked out for the three investors:

TPG

Cash invested: US$1.74 billion
Cash out in dividends: US$1.24 billion
Cash out through sale of stock in IPO (14.27 million shares, including green shoe, at US$19.50 per share): US$278.2 million
Value of remaining shares (159.7 million shares at US$19.50 per share): US$3.1 billion
Ownership prior to IPO: 62.2%
Potential return: 2.65x

CPPIB

Cash invested: US$728 million
Cash out in dividends: about US$520 million
Cash out through sale of stock in IPO (about 6 million shares, including green shoe, at US$19.50 per share): US$117 million
Value of remaining shares (67 million shares at $19.50 per share): US$1.3 billion
Ownership prior to IPO: 26%
Potential return: 2.66x

Leonard Green

Cash invested: US$300 million
Cash out in dividends: US$214 million
Cash out through sale of stock in IPO (2.5 million shares, including green shoe, at US$19.50 per share): US$48 million
Value of remaining shares (27.5 million shares at US$19.50 per share): US$536.25 million
Ownership prior to IPO: 11%
Potential return: 2.66x

IMS, in its IPO filing, noted that it has a “substantial level of indebtedness.” Before its sale to the PE firms, the company’s long-term debt was US$1.3 billion, as of September 2009. By December 2012, long-term debt had jumped to US$4.1 billion, and stood at US$4.9 billion at the end of last year, according to regulatory filings. IMS plans to use proceeds from the IPO to reduce its debt to US$3.95 billion, the filings said.

Officials for IMS Health, TPG, Green and CPPIB declined comment.

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