Cinven, ABRY ready final bids for KKR's Northgate unit - sources

By Pamela Barbaglia and Freya Berry

LONDON, Nov 20 (Reuters) - U.S. and European buyout funds are preparing final bids to acquire a division of KKR's software firm Northgate Information Solutions in a deal that could value the asset at up to 470 million pounds ($738 million), sources familiar with the process said.

London-based private equity firm Cinven is working on submitting a binding offer ahead of a Nov. 27 deadline, the sources said.

Northgate Public Services (NPS), whose clients include Britain's police, local government agencies and the National Health Service, expects to receive another three or four offers from a combination of generalist and technology-centred buyout groups including ABRY Partners in Boston, one of the sources said.

NPS, which is advised by Rothschild, will select a buyer in December hoping to fetch a price of eight to ten times its projected core earnings of 47 million pounds, two sources said.

Representatives at Northgate (LSE: NTG.L - news) , Rothschild and Cinven declined to comment. A spokesman for ABRY could not be reached for comment.

Financial sponsors could rely on about 300 million pounds of debt financing which equates to six to 6.5 times NPS' core earnings, one of the sources said. NPS expects to generate turnover of 195 million pounds in the financial year ending April 2015.

The sale of NPS follows the acquisition of its main rival in Britain, Civica, by Canada's OMERS Private Equity for an enterprise value of 390 million pounds in 2013.

OMERS took part in the first round of the NPS sale but subsequently walked away. European private equity firms EQT and Montagu have also recently pulled out, the sources said. Representatives of OMERS, EQT and Montagu declined to comment.

NEXT STEP

After selecting a buyer for NPS, KKR is expected to review sale options for NGA Human Resources, formerly known as NorthgateArinso, which ranks as the largest unit of Northgate Information Solutions and provides human resources software.

The sale of NGA Human Resources would be the last step of Northgate's breakup which kicked off last year with the disposal of the group's managed services division to UK outsourcing company Capita (LSE: CPI.L - news) for 65 million pounds.

NGA, which reported revenues of 550 million pounds in 2012, could be sold as part of a management buyout, the sources said, while cautioning that no decision has been taken yet.

KKR first invested in Northgate Information Solutions in 2008 when it took the company private for 593 million pounds. (1 US dollar = 0.6370 British pound) (Reporting By Pamela Barbaglia; editing by Keiron Henderson)