Silver Lake, Warburg To Buy IDC

Buyout firms Silver Lake and Warburg Pincus are to buy financial data provider Interactive Data Corp. (IDC) for $3.4 billion in cash, including a $2 billion payment to majority owner Pearson, which will use the capital to expand.

Pearson—which owns the Financial Times, Penguin Books and the world’s biggest education business—said it would use the proceeds from the sale of its most profitable unit to accelerate its expansion through bolt-on acquisitions.

The sale of IDC to the two buyout firms is the biggest leveraged buyout so far this year. “Pearson and Interactive Data have extensive growth opportunities and ambitious expansion plans,” Pearson Chief Executive Marjorie Scardino said in a statement. “We believe this transaction will give both companies greater focus and opportunity to invest more in their strong market positions,” she added.

Analyst Sam Hart of Charles Stanley Research wrote in a note: “The sale of the stake may lead to some increase in earnings volatility for Pearson, as IDC’s profitability was relatively predictable.”

Silver Lake and Warburg Pincus beat bidding groups that sources have told Reuters, publisher of Buyouts, included Kohlberg Kravis Roberts & Co. and CVC Capital Partners, and Bain Capital and Advent International.

The deal values IDC at 24x expected 2010 earnings, according to Thomson Reuters. That compares with an average trading multiple of 27x for U.S. specialty investment services, according to Reuters data.

A source familiar with the situation told Reuters that buyout shop firm Hellman & Friedman had pulled out of the Silver Lake-Warburg Pincus consortium about before the deal was signed because it felt the price was getting too high.

The transaction is fully financed by a combination of equity from the buyers and debt financing from Bank of America Merrill Lynch, Barclays, Credit Suisse and UBS, Pearson said. Credit Suisse, Barclays Capital, Morgan Stanley and UBS were financial advisers to the buyers. The deal is expected to closed by the end of the third quarter, subject to regulatory and other approvals.

—Georgina Prodhan is a Specialist Correspondent for Reuters. Reuters correspondents Robert MacMillan, Quentin Webb and Simon Meads contributed to this story.