New Mountain poised for big gain in Deltek IPO

New Mountain Capital LLC stands to realize nearly 5 times its initial investment when Deltek Inc., a business software provider it bought in 2005, goes public.

The buyout shop, based in New York, acquired Deltek for $180 million, which included $105 million in equity and $75 million in debt.

Herndon, Va.-based Deltek filed Friday to sell 9 million shares in an initial public offering at $17 to $19 each via bookrunner Credit Suisse Group. At the midpoint price of $18, the transaction would produce $162 million.

Currently, New Mountain owns about 74%. It plans to sell about 3.9 million shares in the IPO. Afterward, the firm will have a 57.6% stake, or 25.2 million shares, not including an overallotment option.

At $18 a share, New Mountain stands to gain $70.2 million from the offering. Its remaining holding will be valued at roughly $454 million. Including unrealized gains and the sale of shares, New Mountain could realize 4.99 times its initial investment.

The IPO is anticipated to price Oct. 31, one knowledgeable person said. Deltek is expected to trade on the Nasdaq under the ticker PROJ.

Other underwriters on the deal include J.P. Morgan Chase & Co., Lehman Brothers Inc., Merrill Lynch & Co., Wachovia Securities LLC, William Blair & Co. LLC and Montgomery & Co. LLC. The underwriters have the option to buy an additional 1.3 million shares.

Kenneth deLaski, Deltek's cofounder and former CEO, is offering 743,259 million shares and could gain $13.3 million. He will reduce his stake to 4.8 million shares, or 11.2%, not including the overallotment option. Including unrealized gains, deLaski could reap about $100 million.

Donald deLaski, Kenneth's father and a Deltek cofounder, is selling 322,309 shares. He stands to gain $5.8 million from the IPO. His remaining stake, of 2.1 million or 4.9% (not including the greenshoe), would be worth $37.8 million. In all, including unrealized gains, Donald deLaski could realize $43.6 million.

Donald and Kenneth deLaski founded Deltek in 1983 as Contract Data Systems Inc. to sell accounting software to companies that contract with the U.S. government. The company changed its name to Deltek Systems Inc. in 1984.

Deltek went public in 1997 and private in 2002 when the deLaskis acquired it. It was sold in 2005 to New Mountain.

Deltek provides business software for project-oriented organizations, including information technology contractors, architecture, engineering, aerospace and defense companies. The company has 12,000 customers. It employs about 1,200 people.

Deltek itself is offering 3 million shares while selling shareholders, including senior management, are providing about 6 million, according to an Oct. 12 regulatory filing.

The software provider said it expects to receive about $42.9 million in net proceeds from the IPO. Deltek also expects to receive $3.9 million in proceeds from selling shareholders in connection with their planned exercise of options.

The company said it anticipates using proceeds from the IPO and from selling shareholders to pay off debt.

Deltek, with 43 million shares outstanding, would have a $774 million market capitalization at an $18-a-share IPO price.