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

TPG, the 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 $18 to $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 IMS Health in a deal valued at $5.2 billion, including roughly $2 billion in debt. The sponsors committed to invest up to $2.8 billion equity in the deal, SEC filings show.

The sponsors have received about $2 billion in dividends. This includes a $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 $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: $1.74 billion
• Cash out in dividends: $1.24 billion
• Cash out through sale of stock in IPO (14.27 million shares, including green shoe, at $19.50 per share): $278.2 million
• Value of remaining shares (159.7 million shares at $19.50 per share): $3.1 billion
• Ownership prior to IPO: 62.2%
• Potential return: 2.65x

CPPIB

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

Leonard Green

• Cash invested: $300 million
• Cash out in dividends: $214 million
• Cash out through sale of stock in IPO (2.5 million shares, including green shoe, at $19.50 per share): $48 million
• Value of remaining shares (27.5 million shares at $19.50 per share): $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, IMS’ long-term debt was $1.3 billion, as of September 2009. By December 2012, long-term debt had jumped to $4.1 billion, and stood at $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 $3.95 billion, the filings said.

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

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