Royal Bank of Canada is in the market with a deal backingOpen Text's $489 million purchase of Hummingbird, a global provider of enterprise software solutions. The bank is in the market with the $465 million credit, which is split into a $75 million revolver and a $390 million term loan, according to a banker. Price talk is LIBOR plus 2 1/4% on both tranches, though one banker thought pricing might tighten.
The bank had gone out to the market with a $490 million financing split into a $415 million term loan and a $75 million revolver, but the term loan was downsized to $390 when the company decided to utilize $25 million of cash on hand to complete the financing of the acquisition, a banker said. The size of the revolver and price talk did not change.
Toronto-based Hummingbird had initially agreed to be acquired by Symphony Technology Group for $26.76 per share, but terminated the transaction to instead be acquired by Open Text for $27.85 per share. Because of the termination, Hummingbird was forced to pay a termination fee of $11.7 million to Symphony. The merger is being viewed by industry observers as a potential catalyst for a takeover by Hewlett-Packard, which has been rumored to have made informal advances towards Open Text, according to an article in Globe and Mail. Peter Misek, an analyst with Canaccord Adams, predicted that HP could pay up to $25 a share for the combined company, according to the article.
"It's an interesting deal...it looks do-able," said an investor, citing pricing and debt leverage, which is approximately 3.6 times. Moody's Investors Service rated the credit Ba3 with a stable outlook and expects the company's debt leverage to drop below 3.6 times in the next 12 to 18 months.
Waterloo, Ontario-based Open Text is a provider of Enterprise Content Management software solutions. ECM is the strategies and technologies used by the information technology industry for the storage, security, distribution, preservation and destruction of documents and content. The World Anti-Doping Agency recently bought document and records management software from Open Text for its electronic document management. Calls to an Open Text spokesman and a Hummingbird spokeswoman were not returned.