AttachmateWRQ has turned to Credit Suisse and UBS to provide the financing to back its approximately $495 million acquisition of NetIQ. The credit consists of a five-year, $20 million revolver; six-year, $320 million term loan "B" and a six-and-a-half year, $165 million second-lien term loan. Pricing is LIBOR plus 3 1/4% on the revolver and term loan and LIBOR plus 7% on the second lien. Golden Gate Capital, Francisco Partners and Thoma Cressey Equity Partners are AttachmateWRQ's equity sponsors.
In the first half of 2005, NetIQ management was looking to improve the company's core business and improve operating efficiency, according to a filing with the Securities and Exchange Commission. It hired Deutsche Bank to assist the company in selling its web analytics business and in March 2005, the board approved the sale of that business to an affiliate of Francisco Partners for about $93 million. The board took other measures at a July 26, 2005 meeting; it decided it would look to sell the company. Morgan Stanley was later hired to look for potential acquirers. It did not approve the actual sale, however, until the merger agreement with AttachmateWRQ was in place, during the last week of April.
At an Aug. 24, 2005 board meeting, Morgan Stanley said that five parties had submitted non-binding preliminary indications of interest. Francisco Partners, Golden Gate and Thoma Cressey all submitted separate indications of interest; AttachmateWRQ had not participated in the process and was not separately contacted by Morgan Stanley. Morgan Stanley had contacted 34 potential acquirers. The process continued for a number of months until AttachmateWRQ and NetIQ signed the definitive agreement in April.
NetIQ will operate as an AttachmateWRQ business unit and will no longer trade publicly. The combined company will serve over 40,000 customers in over 60 countries. Seattle, Wash.-based AttachmateWRQ provides software and services for customers to interface their mainframes with users on servers or the web. The acquisition is expected to close in August.
Golden Gate Capital, Francisco Partners and Thoma Cressey completed the acquisition of Attachmate Corp. in June 2005. The consortium had previously acquired WRQ in December 2004, and the two companies merged to form AttachmateWRQ last October. It became one of the largest independent providers of software for accessing and integrating legacy applications.
Jeff Libby, senior v.p., finance and operations at Attachmate, said he was not involved in choosing the banks, but said the decision was made based on relationships the private equity groups had with them and the thought that they could "get the deal done." Rajeev Amara, a principal at Golden Gate, said that Credit Suisse was picked because of its expertise in software and previous work it had done with the firms and that UBS was also selected because of relationships it had with the private equity funds.
Standard & Poor's assigned a B rating to the loan and a 2 recovery rating to the $340 million of first lien. The ratings reflect Attachmate's narrow focus, short operating history at profitable levels and high leverage, the ratings agency said. Leverage could not be determined and Libby would not comment on it. Moody's Investors Service assigned a B2 rating to the first lien, saying, the ratings reflect high pro-forma leverage of the combined company; significant restructuring and integration risk; challenges associated with restructuring and costs related to the acquisition; and uncertainty regarding rate of decline within its host access and integration business. The first lien rating is up a notch from the corporate family rating due to its senior-most position in the capital structure.
Calls to officials at Francisco Partners and Thoma Cressey were not returned by press time.