Madison Dearborn to acquire 51% of TransUnion

Posted April 29, 2010 at 4:30 p.m.

By Becky Yerak and Julie Wernau | TransUnion, the Chicago-based credit reporting agency controlled by the
Pritzker family, is getting a new majority owner.

Chicago-based private equity firm Madison Dearborn Partners LLC
announced Thursday it will acquire a 51 percent stake in TransUnion, one
of three major credit bureaus that collect data on the borrowing and
bill-paying habits of consumers.

The Pritzker family will retain about 49 percent ownership of the
privately-owned company.

“We look forward to partnering with the Madison Dearborn team to
capitalize on the numerous growth opportunities before us,” TransUnion
Chair Penny Pritzker said in a statement.

A purchase price wasn’t disclosed.

The Pritzkers are nearing the end of a decade-long quest to divest and
divide the family empire by 2011. The 11 heirs of Jay Pritzker — who died in 1999 after building up a portfolio estimated at
$15 billion — reached an agreement in late 2001 to divest the
family’s assets according to a formal arrangement that includes annual
meetings of family shareholders, regular financial reports and an
arbitration process.

In the most recent of the major divestitures, the Pritzkers took the
Hyatt Hotel chain public in November, raising $950 million. In March
2008, the family sold a majority interest in the Marmon Group industrial
conglomerate to Berkshire Hathaway Inc. for $4.5 billion. And in 2006,
the family sold Conwood, a smokeless tobacco company, for $3.5 billion.

TransUnion is the third-largest of the three major credit bureaus,
according to analysts. Experian, which has credit information on about
300 million consumers, reported 2009 revenue of $3.9 billion. Equifax
reported revenue in 2009 of approximately $1.8 billion and has
information on more than 400 million worldwide credit holders.
TransUnion does not report annual revenue and has information on 500
million people worldwide.

Madison Dearborn has raised more than $18 billion of capital since its
1992 inception and has invested in more than 100 companies. Its other
noteworthy financial services investments include Nuveen Investments,
CapitalSource and PayPal.

TransUnion “is a market leader in an industry that will continue to play
a critical role in the global economy — helping businesses to better
manage risk and improve decision making and consumers to understand and
manage their credit,” Tim Hurd, Madison Dearborn managing director, said
in a statement.

Private equity firms such as Madison Dearborn have seen the debt markets
open up wide, a change from 2008 and 2009.

But Madison Dearbon, despite looking at many potential deals, has been
highly selective over the past two years about making investments.

It continues to be cautious about the economy..

But TransUnion is considered a recession-resilient company that, unlike,
say, manufacturing, technology or consumer businesses, holds up well
whether the economy is robust or shaky.

In many ways TransUnion is a typical deal for Madison Dearborn, which
has been eyeing the credit-reporting industry for years as a possible
investment. It tends to back industry-leading companies on already sound
footing with management teams that it wants to keep on board. It plans
to keep TransUnion management in place.

Madison Dearborn’s other local investments include Nuveen and CDW.

Madison Dearborn plans to use both its fifth and sixth funds to help
finance the TransUnion deal.

About $1 billion was left in Madison Dearborn’s $6.5 billion fifth fund
after a consortium deal for Bell Canada fell through.

It raised about $4 billion for its sixth fund.

Last month Madison Dearborn announced plans to buy BWAY Holding Co., a
rigid container supplier, for $915 million.

In September 2009 it bought NextG Networks, a provider of antenna
systems for wireless carriers.

Like many private equity firms, Madison Dearborn typically holds its
portfolio company for several years and then later sells them either to
another buyer or through initial public offerings of stock. John
Canning, Madison Dearborn chairman, is a former TransUnion Corp.

TransUnion has employees in more than 25 countries on five continents.
It has a strong presence in the U.S. financial services industry, but
has also been trying to make greater inroads in health-care, insurance
and collections markets, as well as continuing to grow worldwide.

It has also developed products for consumers, including

In his most recent report analyst Bradley Meeks — who follows
Equifax and Experian for Morningstar Inc, an independent investment
research firm — said the growth potential for  credit bureaus
is mostly overseas, particularly in emerging markets such as Latin
America, India, Russia and Brazil where credit-related services are
still in the infancy stage.

There have been fewer credit checks in North America, he said, due to a
weakened economy.

“TransUnion, Equifax and Experian operate in an oligopoly where each
company typically does not compete on price,” he wrote, adding that
banks and lenders commonly pull credit reports from all three bureaus at
the same time.

Morgan Stanley was financial adviser to TransUnion.

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One comment:

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