HgCapital Trust plc Regulatory News (HGT)

Hg, the Manager of HgCapital Trust plc ("HGT"), today announces that it has agreed a partial sale of IRIS Software Group (IRIS), a leading global provider of mission-critical software and services in accountancy, payroll, HR and education, to LGP, a Los Angeles-based private equity firm.

The terms of the transaction have not been disclosed.

HGT, whose shares are listed on the London Stock Exchange, gives private and institutional investors the opportunity to participate in all Hg's investments.

This transaction values HGT's investment in IRIS Software Group at approximately £99.8 million. HGT will receive a net distribution of approximately £42.1 million from IRIS, having re-invested a portion of its proceeds in the business alongside other institutional clients of Hg investing through Hg Saturn. As part of the transaction, Hg's Saturn 1 fund will fully exit its remaining position in IRIS. HGT's exposure to IRIS will be £57.7m at closing representing approximately 2.5% of NAV.

Note that these figures only relate to HgCapital Trust's share of Hg's overall investment in IRIS Software Group.

Based on the 30 September 2023 reported NAV, the pro-forma NAV of the Trust is expected to be £2.3 billion (or 498.5 pence per share). HGT's available liquid resources, which includes the undrawn bank facility of £350 million for future deployment (including all announced transactions and the interim dividend paid in October) are estimated to be £705 million (31% of the pro-forma 30 September 2023 NAV).

The investment will reduce HGT's outstanding commitments to invest in Hg transactions to approximately £852 million (37% of the pro-forma 30 September 2023 NAV).

IRIS Software Group secures major US investment from Leonard Green & Partners

Co-controlling investment will support IRIS as it scales as a global leader in accountancy, payroll, HR and education mission-critical software and services.

- New US-based investment will support IRIS as the business continues to scale in North America, executing its long-term strategy with strong executive leadership and an exceptional track record.

- Leonard Green & Partners, L.P. (LGP) to take a co-controlling stake alongside Hg, who is re-investing in the business, acknowledging Hg's strong 20-year relationship and experience working with the IRIS team.

- ICG shares LGP's and Hg's belief in IRIS's upside potential in North America and will remain as a minority investor in the business through a new investment.

- Investment represents one of Europe's largest software buyouts for 2023, valuing IRIS at an Enterprise Value (EV) of around £3.15bn.

Los Angeles, CA, US and London, UK. 23 December 2023. IRIS Software Group (IRIS), a leading global provider of mission-critical software and services in accountancy, payroll, HR and education, today announces it has secured a co-controlling investment from LGP, a Los Angeles-based private equity firm, in a transaction valuing the business at an EV of around £3.15bn.

LGP will take a co-controlling stake in the business, supporting IRIS's US expansion ambitions with its local presence and network. Hg, a leading investor in European and transatlantic software and services businesses, will retain a co-controlling stake in IRIS in acknowledgement of Hg's transatlantic capabilities and strong 20-year relationship and experience working with the IRIS team. As part of the transaction, ICG will remain as a minority investor in the business.With 80% of customers remaining with IRIS for five years or more, the business has firmly established itself as a trusted leader with a strong reputation. This has contributed to significant growth over the last five years, both organically and through acquisitions, enriching and improving its customer offering, whilst delivering revenue and EBITDA growth rates of 20% CAGR. Today IRIS has a rapidly growing presence in North America - which now accounts for over 25% of group revenues.

Elona Mortimer-Zhika, CEO of IRIS, says: "To secure backing from a leading US investor in LGP, alongside the continued support of Hg and ICG, underscores IRIS's enduring success over many decades. Our unparalleled product portfolios combined with excellent customer service have resulted in IRIS being a leader in our sectors. We have also expanded our country presence with a notable focus on the US, so LGP's local expertise will be instrumental in our acceleration to a world-class transatlantic business."

Starting 45 years ago with accountancy software, IRIS has evolved to be relied on by more than 100,000 customers. Today, the business handles $18 billion of payroll payments annually in the US and Canada, and processes six million pay slips worldwide each month. One in six of the UK's workforce is paid by IRIS payroll offerings, and more than 850,000 UK employees are managed by IRIS HR solutions."

IRIS has a broad UK education software suite with more than 12,000 UK schools and academies using its solutions. More than 4 million parents and guardians benefit from IRIS' parent engagement apps to connect with their child's school, with 300 million messages delivered annually between schools and parents.

Usama Cortas, Partner at LGP, says: "We are incredibly excited to partner with IRIS, whose leadership, value-based culture and reputation for excellence align with the key characteristics we look for in the companies we invest in. We very much look forward to working with Elona and the rest of the management team, as well as Hg and ICG, to accelerate the next phase of IRIS' growth.

IRIS was Hg's inaugural investment into the Tax & Accounting software sector in 2004. Hg has been an investor in the business ever since, during which time the firm has invested around $10 billion in the wider tax and accounting software segment across Europe and North America.

Nic Humphries, Senior Partner at Hg, says: "IRIS and Hg have a long history, evolving together over the past 20 years. We're delighted to now partner alongside LGP to accelerate IRIS' US ambitions. Now, more than ever, we recognise Elona and her team as leading a high-quality software and services business, digitising a sector still in the early stages of its software adoption, with tremendous opportunity still ahead."

Closing is subject to customary regulatory clearances.

Arma Partners and Rothschild & Co acted as corporate finance advisors to Hg. Jefferies International and William Blair acted as financial advisors to LGP. Legal advisors included Skadden and Linklaters for Hg; Latham & Watkins for LGP and Ropes & Gray for ICG.

For further details:

Hg

Tom Eckersley +44 (0)208 148 5401

HGT

Laura Dixon +44 (0)20 8396 0930

Brunswick

Azadeh Varzi +44 (0)207 404 5959

Hg@brunswickgroup.com

About HgCapital Trust plc

HgCapital Trust plc, whose shares are listed on the London Stock Exchange (ticker: HGT.L), gives investors exposure through a liquid vehicle to a portfolio of high-growth private companies in the software and services sector. The selection of new investments and creation of value in these businesses are managed by Hg, an experienced and well-resourced private equity firm with a long-term track record of delivering superior risk-adjusted returns for its investors. For further details, please see www.hgcapitaltrust.com.

The contents of the Hg, HgCapital Trust, IRIS, ICG and LGP websites are not incorporated into, and do not form part of, this announcement.