Serologicals Corp. is continuing its acquisitive growth strategy, buying Upstate Group for $205 million following its purchase of AltaGen Biosciences in July. But the company's plan to grow through acquisitions could cause problems down the line, according to David Lugg, an analyst with Standard & Poor's. "Although they have a profitable business... they are growing the business through acquisitions," he noted. "That's a risk going forward. As acquisitions get large the company can be more challenged to integrate them."
Syndication for the financing of the Upstate acquisition launched last Thursday, led by J.P. Morgan. The credit comprises a five-year, $30 million revolver and seven-year, $80 million term loan. The "B" loan is being offered at LIBOR plus 2 1/4% while the revolver is priced at LIBOR plus 2% drawn with a 50 basis points undrawn fee. The credit has been rated BB- by S&P and has been given a recovery of 1, indicating a 100% recovery in the event of default.
While the new credit agreement will likely have some restrictions on acquisitions, Lugg does not expect it to be too limiting. "The company is pretty clear about how it is growing its business," he noted. "I would not expect there to be severe limitations on their ability to do acquisitions." Serologicals provides chemicals and tools used in laboratories and Upstate also provides tools to researchers at pharmaceutical and biotechnology companies. A J.P. Morgan spokesman declined comment and Serologicals officials did not return calls.