SunGard Data Systems Inc. is considering a potential spin-off of its Availability Services unit, according to Standard & Poor’s Ratings Services. Such a move would be the first significant exit for the company’s private equity backers since they took it private in August 2005. Availability Services accounts for 22 percent of SunGard’s business.
At the time of the LBO, the $11.4 billion deal was the largest take-private of a technology company ever and the second-largest leveraged buyout on record. Silver Lake Partners organized the group of buyers, whose other members are Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. LP, Providence Equity Partners and TPG Capital.
SunGard, of Wayne, Pa., provides a range of risk management and operations systems to financial companies, higher education and the public sector, including disaster recovery and Internet hosting.
The Availability Services business gained prominence in the wake of 9/11, when many companies in New York’s financial district were knocked out of operation. Where they previously often had trucked data tapes to backup locations at the end of each business day, reforms enacted after the attacks led many financial companies and others to continuously back up their transaction records to remote servers. Such “hot mirroring” is today a standard practice.
But Availability Services has played a diminishing role at SunGard in recent years, declining to 22 percent of its total revenue in 2010 from 25 percent in 2009 and 28 percent in 2008. SunGard reported $2.8 billion in revenue in 2010, and this week it said Availability Services revenue in 2011 was $1.46 billion, down 1 percent year over year (down 2 percent adjusting for currency fluctuations). SunGard’s 2011 revenue was $4.5 billion, flat year over year (down 2 percent adjusting for currency). Adjusted EBITDA was $1.4 billion and adjusted operating income was $880 million.
SunGard announced a deal Wednesday with Amazon.com Inc. under which SunGard Availability Services will provide cloud backup through Amazon’s Direct Connect services.
The S&P disclosure came Friday in conjunction with its decision on SunGard’s corporate credit rating as the company negotiated an extension of its $2.5 billion term loan B. S&P affirmed SunGard’s ’B+’ corporate credit rating.
A SunGard spokesman did not immediately respond to a request for comment.
By Steve Bills
Target: SunGard Availability Services
Revenue: $1.46 billion
Sponsor: Silver Lake Partners, Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. LP, Providence Equity Partners, TPG Capital
Seller: SunGard Data Systems Inc.