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November 6, 2009 3:14 PM

S&C, Ropes & Gray Work Biggest LBO This Year

Posted by Matt Straquadine

Update: @ 3:20 p.m. The fifth paragraph of this post has been altered to include the names of the Ropes & Gray attorneys on the deal.

Market research company IMS Health Inc. announced Thursday that it is being acquired by TPG Capital and the investment board of the Canadian Pension Plan for $5.2 billion--the largest leveraged buyout so far this year, Bloomberg reports.

The buyers will pay $22 per share to IMS stockholders, a 31 percent premium over the closing price before the deal was announced. Also included in the purchase price is the assumption of $1.3 billion in debt.

A team from Sullivan & Cromwell, led by corporate partners Keith Pagnani and Alan Sinsheimer, represented IMS, with partner Neal McKnight providing financing advice. The deal is welcome relief after a bleak two years, Pagnani says.

“It would be great if we can look back one day and say that this was the deal that marked private equity’s renewed interest in the public markets,” he says.

Ropes & Gray represented TPG and CPP, co-led by partner Alfred Rose who didn't respond to requests for comment. Other Ropes partners handling the deal were Amanda Morrison, co-leader with Rose, Loretta Richard, Byung Choi, Michael Lee, Asheesh Goel, Chris Leich, and Timothy McCrystal. Also advising CPP was Canadian firm Torys, which didn't respond to a request for comment.

Created in 1992, Fort Worth-based TPG has $45 billion in assets under management, according to its website. The company is best known for teaming up with private equity group KKR in 2007 to buy energy company TXU Corp. for $31.8 billion--the largest leveraged buyout in history.

CPP is Canada’s government-run public retirement benefits program, which operates in much the same way as Social Security in the U.S. CPP’s investment arm is responsible for generating a profit on the pooled contributions of Canadian taxpayers to avoid inflationary depreciation.

Pagnani says getting financing for the deal was relatively easy for two reasons: IMS’s history of strong revenue streams and lenders' renewed willingness to finance transactions. From 2006 to 2008,  IMS had operating revenues between $1.9 and $2.1 billion, according to SEC filings.

Analysts told Bloomberg that buyout managers who finance LBOs have a collective $400 billion in unspent capital right now--the definition of pent-up demand.

“Let’s hope this transaction is an indicator that the debt market is opening up,” Pagnani says. “Hopefully we’ll see more of these as a result.”

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