United Industries Corp., a portfolio company of Thomas H. Lee Partners, has tapped Bank of America and Citibank to lead the financing backing its $143.8 million acquisition of The Nu-Gro Corp. The financing will comprise a $125 million revolver and $385 million term loan. The company's existing debt will be refinanced with the transaction, noted Dan Johnston, United's executive v.p. and cfo.
B of A and Citi advised United on the transaction. B of A, Morgan Stanley and CIBC World Markets led the bank deal back in 1999 when Thomas H. Lee acquired United. "Citi is new to the picture. We're a pretty fast growing company. A lot of banks had reached out to us to meet us and understand our story," Johnston said. "Citi brought us some good ideas. They were instrumental in the Nu-Gro idea."
United's existing facility includes a $150 million "B" loan and $90 million revolver. The revolver matures in January 2005. "We really needed to be in the markets anyway," Johnston said. The existing facility is priced on a grid tied to leverage. The current spread could not be determined, but Johnston said it is, "probably in the high 300s." He said it is too early to discuss pricing for the new facility.
The new debt will also be used to redeem United's $56 million outstanding preferred stock and $3 million of its outstanding 97/8% notes. The increased leverage from the acquisition and partial recapitalization will increase United's debt-to-EBITDA ratio from 4.6 times to 5.8 times on a pro-forma basis. United, which goes to market as Spectrum Brands, manufactures lawn and garden care products. Nu-Gro produces and distributes controlled release nitrogen raw material to the fertilizer industry.