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Veritas Capital shops Global Tel*Link

by David Carey | Published August 19, 2011 at 11:55 AM

Right on the heels of its $960 million sale of Vangent Holdings Corp., private equity firm Veritas Capital is poised to unload its portfolio company Global Tel*Link Corp., a provider of phone services to prisoners, for around $1 billion, a person familiar with the matter said.

New York-based Veritas, Global Tel*Link's 82% owner, put the company on the block in June, the source said. The auction has overlapped with that of Vangent, a healthcare IT provider that Veritas agreed this week to sell to General Dynamics Corp.

Goldman, Sachs & Co. and J.P. Morgan Securities LLC are running the Global Tel*Link auction, with final bids due late this month or early September. The suitors are said to include at least one buyout firm and a handful of the company's competitors.

"Financial buyers have really dried up right now. It's the strategics that seem to be active," the source said.

The likeliest strategic bidders include Longview, Texas-based Network Communications International Corp., the Keefe Group unit of St. Louis-based Centric Group LLC and Dallas-based Securus Technologies Inc. All are privately held.

Securus was recently acquired by Castle Harlan Inc., a New York private equity shop, for an undisclosed price that is said to have topped $450 million.

Mobile, Ala.-based Global Tel*Link is the country's biggest provider of telecom services to jail and prison inmates, with projected 2011 Ebitda of about $150 million.

In February 2009 Veritas teamed with a unit of Goldman, GS Direct LLC, to buy Global Tel*Link for $345 million from Los Angeles private equity firm Gores Equity LLC, the source said.

Goldman initially said it would contribute up to 45% of the $140 million equity investment, but it backtracked at a time when financial markets were in disarray and its own balance sheet was shaky.

In the end Veritas injected about $115 million, or 82% of the equity. GS Direct put in $15 million, according to the source.

Veritas has beefed up Global Tel*Link with add-on acquisitions, buying Digital Solutions Inc. in June 2010 and Public Communications Services Inc. last November.

Late last year Veritas and Goldman recouped 100% of their investments via a debt-funded dividend.

Global Tel*Link has $492 million of debt net of cash, the source said.

If it were sold for 7.5 times cash flow -- roughly the multiple that Castle Harlan paid for Securus -- Veritas and GS Direct would reap about a 450% profit.

In Vangent, Veritas stands to harvest a 240% profit on its $157 million, 4-1/2-year-old investment.

Over the past year, Veritas has sold government services provider McNeil Technologies Inc. for $355 million and taken public semiconductor maker Aeroflex Holding Corp.

It also has purchased electronics equipment maker CPI International Inc. for $525 million and PerkinElmer Inc.'s lighting and sensors business for $500 million.

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Tags: Goldman Sachs | private equity | Vangent Holdings Corp. | Veritas Capital

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Veritas Capital shops Global Tel*Link

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