August 16, 2012 / 11:28 PM / 5 years ago

Lego owners, Ontario teachers invest $614 million in ISS

3 Min Read

COPENHAGEN (Reuters) - Toymaker Lego's owners and a Canadian pension fund are to pay 3.72 billion Danish crowns ($614 million) for a 26 percent stake in Danish cleaning group ISS ISSHOI.UL, which will use the money to cut debt, relaunching its IPO plans.

ISS made a failed attempt at an initial public offering last year after which it agreed to a 130 Danish crowns per share cash and share offer from G4S Plc (GFS.L), a deal the British security services group later scrapped.

Thursday's deal was worth 105 crowns per share, said ISS, which has been focused on cutting debt and boosting growth.

"ISS is on track to significantly deleverage ahead of an IPO within a few years," chairman Ole Andersen said.

The Ontario Teachers' Pension Plan will invest about 2.605 billion crowns for its stake, while the Danish Kirk Kristiansen family's holding and investment company, Kirkbi A/S, which controls Lego, will pay 1.116 billion.

ISS's owners, private equity groups EQT Partners and Goldman Sachs Capital Partners (GS.N) are not selling any shares and remain majority owners, ISS said.

The proceeds will be used to repay 11 percent senior notes due 2014 after the December 2012 call date. The capital injection will lower ISS's leverage ratio to 5.15 times earnings before interest, tax, depreciation and amortization (EBITDA) from 5.86, ISS said.

Kirkbi, which owns 75 percent of the Lego Group, said it had been watching ISS for several years and considered it a well-run company, positioned for growth, particularly in emerging markets.

"We see excellent opportunities to continue growing revenues as ISS is well placed to capture new customers," said Jo Taylor, who heads Teachers' London office. 䐬

With roughly C$117 billion ($118 billion) in net assets, Teachers' is the largest single-profession pension plan in Canada. It invests and administers the pensions of about 300,000 active and retired teachers in Ontario, Canada's most populous province.

"We look forward to helping ISS expand successfully in both developed and emerging markets," Taylor said in a statement.

ISS said that, while the capital injection does not change its financial outlook for 2012, it is expected to positively impact the company's financial position.

A lender to ISS, who asked to remain anonymous, said: "It is very positive news. We like the company, but it is pretty over levered and this will allow them to bring down the debt.

"It is quite an unusual move to come in on the equity as it dilutes EQT's (and Goldman Sachs's) stake, but Teachers and Kirkbi have money to invest and we welcome it."

($1 = 6.0604 Danish crowns)

($1 = 0.9883 Canadian dollars)

Reporting by John Acher in Copenhagen and Euan Rocha in Toronto; Additional reporting by Isabell Witt in London; Editing by Dan Lalor and Andre Grenon

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