Apax's Sophos valued at £1bn in IPO

Mikkel Stern-Peltz
29 June 2015

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Apax Partners and Investcorp-owned British cyber security company achieved a valuation of ТЃ1bn when it began trading on the London Stock Exchange on Friday.

The comapny raised £80m in the IPO which priced Sophos' shares at 225p, with 35% of the company being in free float ahead of a potential over-allotment option on 1 July which could see the free float increased to more than 50%.

Apax will retain a 40.1% stake in the company post-flotation, though that could be reduced further by the over-allotment option. Before listing, Apax held 63.8% of the shares in Sophos through the GP's Apax Europe VII and VI funds, as well as Apax US VII. At 225 pence a share, the value of Apax's realisation in the offering would be £189.67m.

Investcorp's stake will be reduced from 4% before the IPO to 2.5% following the flotation.

The listing included an emission of 35.3 million new shares in addition to the existing 121 million, and the proceeds will be partially used to bring down Sophos' net debt, which was $318m at the end of April.

A total of £16m of the IPO's proceeds will pay for underwriting commissions and other fees and expenses, of which £6m million is exit fees paid to Apax, Investcorp, and Sophos co-founders Jan Hruska and Peter Lammer.

Sophos announced earlier this month it will target a dividend rate of 20% of Sophos's free cashflow for the financial year post-IPO.

JP Morgan Cazenove and Morgan Stanley acted as joint global coordinators, as well as joint bookrunners alongside Deutsche Bank and UBS. JP Morgan was be the sole sponsor and Morgan Stanley acted as stabilisation manager.

Lock-up periods are 180 days for Apax and Investcorp, and 360 days for management.

Previous funding
The exit comes five years after Apax acquired a 70% stake in Sophos for £546m, in a secondary buyout from TA Associates.

Investcorp initially acquired a 10% stake in the company as part of a deal that saw Sophos purchase German cybersecurity business Utimaco Safeware in 2008. Prior to the buyout, the GP had held a 24.99% stake in the Aachen-based company.

3i was the first private equity investor in Sophos, having taken a minority stake in the company as part of a £2.5m injection of replacement capital in 1998.

Four years later, 3i exited when TA Associates bought out Sophos for £41m.

Company
Sophos is an Oxfordshire-headquartered provider of IT security systems and software, including anti-virus software.

Founded by Jan Hruska and Peter Lammer in 1985, the company posted revenues of $446.7m in the year ending in March 2015, compared to $378.8m and $361.6m in the two years prior, and a 2015 adjusted EBITDA of $101.4m.

Sophos employs 2,000 people.

People
Kris Hagerman is the CEO of Sophos.