SunGard sold for $11.3bn

In the largest private equity deal since the RJR Nabisco buyout in 1989, a group of seven private equity firms led by Silver Lake Partners has agreed to buy financial software company SunGard.

A syndicate of private equity firms today announced an agreement to acquire publicly traded financial-services software company SunGard Data Systems for $11.3 billion (€8.8 billion).

The deal was led by Silver Lake Partners and includes Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts, Providence Equity Partners and Texas Pacific Group.

The transaction marks the largest private equity deal since KKR acquired RJR Nabisco in 1989 for $31.3 billion, financed mostly with high-yield bonds.

SunGard shareholders will receive $36 per share. Earlier this month the stock was trading near $25 per share.

SunGard, based in Wayne, Pennsylvania, makes integrated software primarily for the financial services industry. The company has annual revenues totalling roughly $3 billion.

The deal is reminiscent of Silver Lake’s 2000 buyout of Seagate Technologies, a publicly traded maker of disk drives. That deal has been a major success for Silver Lake and its syndicate partners Texas Pacific, JP Morgan Partners, Goldman Sachs and August Capital.

Cristobal Conde, president and chief executive officer of SunGard, will remain at the helm of the company.

In a statement, Silver Lake co-founder Glenn Hutchins said, “Each partner in the consortium brings considerable and complimentary expertise to this investment. It is a powerhouse group. . .”

The deal will reportedly involve a $3.5 billion tranche of equity. It comes hot on the heels of another large syndicate deal – the $7.3 billion buyout toy retailer Toys R Us by KKR, Bain Capital and Vornado Realty Trust.

While the various firms involved in the transaction praise each other, many are in the process of seeking to raise funds of unprecedented size specifically so they will be equipped with more equity for deals of this magnitude, making it less necessary to assemble large syndicates.

The deal also comes amid LP concern that consortia activity decreases diversity in institutional portfolios. “If you’re an investor in a number of those funds, you’re buying a pretty big piece of SunGard”, said Louis Singer, a partner in the New York office of law firm Orrick, Herrington & Sutcliffe.

Investors and GPs alike have also increasingly voiced concern that syndicates like SunGard commoditise private equity capital just as firms need to further distinguish themselves in a competitive market. Adds Singer, who represents major limited partners in private equity funds: “All of these funds are used to leading deals. The question is – how are they going to collaborate as owners going forward? Whose vision is going to control the direction of the company?”

Debt financing provided by JP Morgan, Citigroup Global Markets, Deutsche Bank Securities, Goldman Sachs and Morgan Stanley. Morgan Stanley also acted as financial advisor to the consortium partners. 

Credit Suisse First Boston acted as financial advisors to SunGard. Shearman & Sterling acted as legal advisor to SunGard. Morgan, Lewis & Bockius acted as legal advisor to SunGard's management in connection with the transaction. Ropes & Gray and <F