Apax set to buy Danish giant ISS in £5.4bn deal

Apax Partners is in pole position to take over the Danish cleaning, security and catering group ISS in an $8.5bn (£5.4bn) deal, including debt.

An acquisition by the London-based private equity firm, which would be one of the biggest leveraged deals in Europe since the onset of the credit crisis two years ago, would signal a revival in the debt markets.

ISS is among the world's largest private-sector employers, counting more than 500,000 people across 50 countries on its payrolls. Earlier this month, the Danish group won a seven-year contract from the Foreign and Commonwealth Office to manage properties associated with British embassies and High Commissions throughout the Asia-Pacific region and in India.

It is owned by Goldman Sachs Capital Partners and the Swedish private equity fund EQT partners, who kicked off a process to either sell or list the company earlier this year.

Goldman and EQT, which is linked to Sweden's Wallenberg family through their Investor investment vehicle, bought ISS in a $5.3bn leveraged deal in 2005. The Danish group's competitors include the security services group G4S and the catering giant Compass.

Apax has entered exclusive talks with ISS after beating two rival consortia, one that included Blackstone, Bain Capital, Nordic Capital and Clayton Dubilier & Rice, and one that comprises CVC Capital Partners and Apollo.

The firm is believed to be canvassing the sovereign wealth and pension funds that have put money into its buyout fund about investing in ISS. The deal is expected to call for both debt and equity financing. The debt element is seen at around $5bn, though a person familiar with the situation warned that financing discussions remain at an early stage.

When contacted, Apax declined to comment last night. ISS, which has made more than 600 acquisitions since the turn of this century, booked 4.74bn Danish kroner (£533m) in earnings before interest, tax, depreciation and amortisation, on revenues of 69bn Danish kroner last year. Its main competitors include Compass and G4S from the UK, as well as Securitas and Sodexho.

Goldman and EQT have attempted to profit from their investment in ISS in the past, having appointed advisers to study the possibility of a listing before the credit crisis struck in late 2007.

If successful, the Apax deal would be the biggest leveraged buyout in the Danish market since 2007. It would also be among top five in Europe, according to figures from the research firm Dealogic.

At more than $20bn, Kohlberg Kravis Robert's takeover of Alliance Boots remains the biggest European buyout deal since 2007.