Vestar makes 3x on $720 mln ISS sale: source

Vestar Capital has tripled its money with the sale of Institutional Shareholder Services, a source said.

Genstar Capital said Oct. 27 that it closed its $720 million buy of ISS. The deal included a roughly $354 million cash equity contribution from the PE firm, Moody’s Investors Service said.

ISS is highly levered, with debt-to-EBITDA expected to hit more 8x after the sale,  the credit-rating company said in September.

Founded in 1985, ISS provides corporate-governance services. The Rockville, Maryland, company’s customers include asset managers, hedge funds and asset service providers. ISS revenue at the end of June stood at $147 million.

Vestar bought ISS in 2014, paying $364 million. ISS’s revenue in 2014 was $125 million while its debt-to-equity at the close of its sale to Vestar was 6.2x, Moody’s said in 2014.

Vestar did get some of its money back last year. In December 2016, ISS paid out a dividend to shareholders that Moody’s called “sizable.” The distribution was expected to cause ISS’s leverage to jump to levels similar to those it reached with its 2014 LBO, the credit rater said. ISS’s leverage at the end of September 2016 was “very high,” at 7x debt-to-EBITDA, Moody’s said in a December credit opinion.

The New York PE firm typically invests from $50 million to $100 million equity per deal. Sectors include consumer, business services and industrial products, as well as healthcare.

Vestar this year has been out fundraising for its seventh flagship fund, Buyouts reported in February. The pool is targeting $1 billion, the story said.

Vestar used its sixth fund to invest in ISS. Vestar Capital Partners VI LP closed on $804 million in 2013, Buyouts said.

Executives for ISS declined comment.

Action Item: Contact Gary Retelny, ISS president and CEO, at +1 646-680-6350.

245 Park Avenue, Manhattan, including the New York office of Vestar Capital Partners, on Nov. 3, 2017. Photo by Buyouts Staff.