TIDMHGT
RNS Number : 8423X
HgCapital Trust PLC
23 December 2023
Hg, the Manager of HgCapital Trust plc ("HGT"), today announces
that it has agreed a partial sale of IRIS Software Group (IRIS), a
leading global provider of mission-critical software and services
in accountancy, payroll, HR and education, to LGP, a Los
Angeles-based private equity firm.
The terms of the transaction have not been disclosed.
HGT, whose shares are listed on the London Stock Exchange, gives
private and institutional investors the opportunity to participate
in all Hg's investments.
This transaction values HGT's investment in IRIS Software Group
at approximately GBP99.8 million. HGT will receive a net
distribution of approximately GBP42.1 million from IRIS, having
re-invested a portion of its proceeds in the business alongside
other institutional clients of Hg investing through Hg Saturn. As
part of the transaction, Hg's Saturn 1 fund will fully exit its
remaining position in IRIS. HGT's exposure to IRIS will be GBP57.7m
at closing representing approximately 2.5% of NAV.
Note that these figures only relate to HgCapital Trust's share
of Hg's overall investment in IRIS Software Group.
Based on the 30 September 2023 reported NAV, the pro-forma NAV
of the Trust is expected to be GBP2.3 billion (or 498.5 pence per
share). HGT's available liquid resources, which includes the
undrawn bank facility of GBP350 million for future deployment
(including all announced transactions and the interim dividend paid
in October) are estimated to be GBP705 million (31% of the
pro-forma 30 September 2023 NAV).
The investment will reduce HGT's outstanding commitments to
invest in Hg transactions to approximately GBP852 million (37% of
the pro-forma 30 September 2023 NAV).
IRIS Software Group secures major US investment from Leonard
Green & Partners
Co-controlling investment will support IRIS as it scales as a
global leader in accountancy, payroll, HR and education
mission-critical software and services.
- New US-based investment will support IRIS as the business
continues to scale in North America, executing its long-term
strategy with strong executive leadership and an exceptional track
record.
- Leonard Green & Partners, L.P. (LGP) to take a
co-controlling stake alongside Hg, who is re-investing in the
business, acknowledging Hg's strong 20-year relationship and
experience working with the IRIS team.
- ICG shares LGP's and Hg's belief in IRIS's upside potential in
North America and will remain as a minority investor in the
business through a new investment.
- Investment represents one of Europe's largest software buyouts
for 2023, valuing IRIS at an Enterprise Value (EV) of around
GBP3.15bn.
Los Angeles, CA, US and London, UK. 23 December 2023. IRIS
Software Group (IRIS), a leading global provider of
mission-critical software and services in accountancy, payroll, HR
and education, today announces it has secured a co-controlling
investment from LGP, a Los Angeles-based private equity firm, in a
transaction valuing the business at an EV of around GBP3.15bn.
LGP will take a co-controlling stake in the business, supporting
IRIS's US expansion ambitions with its local presence and network.
Hg, a leading investor in European and transatlantic software and
services businesses, will retain a co-controlling stake in IRIS in
acknowledgement of Hg's transatlantic capabilities and strong
20-year relationship and experience working with the IRIS team. As
part of the transaction, ICG will remain as a minority investor in
the business.
With 80% of customers remaining with IRIS for five years or
more, the business has firmly established itself as a trusted
leader with a strong reputation. This has contributed to
significant growth over the last five years, both organically and
through acquisitions, enriching and improving its customer
offering, whilst delivering revenue and EBITDA growth rates of 20%
CAGR. Today IRIS has a rapidly growing presence in North America -
which now accounts for over 25% of group revenues.
Elona Mortimer-Zhika, CEO of IRIS, says : "To secure backing
from a leading US investor in LGP, alongside the continued support
of Hg and ICG, underscores IRIS's enduring success over many
decades. Our unparalleled product portfolios combined with
excellent customer service have resulted in IRIS being a leader in
our sectors. We have also expanded our country presence with a
notable focus on the US, so LGP's local expertise will be
instrumental in our acceleration to a world-class transatlantic
business."
Starting 45 years ago with accountancy software, IRIS has
evolved to be relied on by more than 100,000 customers. Today, the
business handles $18 billion of payroll payments annually in the US
and Canada, and processes six million pay slips worldwide each
month. One in six of the UK's workforce is paid by IRIS payroll
offerings, and more than 850,000 UK employees are managed by IRIS
HR solutions."
IRIS has a broad UK education software suite with more than
12,000 UK schools and academies using its solutions. More than 4
million parents and guardians benefit from IRIS' parent engagement
apps to connect with their child's school, with 300 million
messages delivered annually between schools and parents.
Usama Cortas, Partner at LGP, says: "We are incredibly excited
to partner with IRIS, whose leadership, value-based culture and
reputation for excellence align with the key characteristics we
look for in the companies we invest in. We very much look forward
to working with Elona and the rest of the management team, as well
as Hg and ICG, to accelerate the next phase of IRIS' growth.
IRIS was Hg's inaugural investment into the Tax & Accounting
software sector in 2004. Hg has been an investor in the business
ever since, during which time the firm has invested around $10
billion in the wider tax and accounting software segment across
Europe and North America.
Nic Humphries, Senior Partner at Hg, says: "IRIS and Hg have a
long history, evolving together over the past 20 years. We're
delighted to now partner alongside LGP to accelerate IRIS' US
ambitions. Now, more than ever, we recognise Elona and her team as
leading a high-quality software and services business, digitising a
sector still in the early stages of its software adoption, with
tremendous opportunity still ahead."
Closing is subject to customary regulatory clearances.
Arma Partners and Rothschild & Co acted as corporate finance
advisors to Hg. Jefferies International and William Blair acted as
financial advisors to LGP. Legal advisors included Skadden and
Linklaters for Hg; Latham & Watkins for LGP and Ropes &
Gray for ICG.
For further details:
Hg
Tom Eckersley +44 (0)208 148 5401
HGT
Laura Dixon +44 (0)20 8396 0930
Brunswick
Azadeh Varzi +44 (0)207 404 5959
Hg@brunswickgroup.com
About HgCapital Trust plc
HgCapital Trust plc, whose shares are listed on the London Stock
Exchange (ticker: HGT.L), gives investors exposure through a liquid
vehicle to a portfolio of high-growth private companies in the
software and services sector. The selection of new investments and
creation of value in these businesses are managed by Hg, an
experienced and well-resourced private equity firm with a long-term
track record of delivering superior risk-adjusted returns for its
investors. For further details, please see
www.hgcapitaltrust.com.
The contents of the Hg, HgCapital Trust, IRIS, ICG and LGP
websites are not incorporated into, and do not form part of, this
announcement.
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