The Reynolds and Reynolds Co. and Universal Computer Systems have tapped Deutsche Bank and Credit Suisse to lead financing for their $2.8 billion merger agreement. The banks will launch a $2.685 billion credit facility at a bank meeting this Wednesday, according to a banker. The deal consists of a revolver, a first lien, a second lien and a third-lien term loan, though actual tranche sizes could not be determined. Pricing on the deal has not yet been determined.
"There are a lot of these tech deals coming out they can put a lot of leverage on these companies," said an investor, commenting that people are willing to buy them even with increased leverage. He cited the recent Open Text deal led by Royal Bank of Canada, which had leverage of about 3.6 times and pricing of LIBOR plus 2 1/4% that a banker believed would probably tighten (CIN, 9/15). Leverage for the Reynolds deal is expected to be around four times through the first lien and about 6.3 times through the third lien, according to a banker.
Reynolds' stockholders will receive $40 per share, totaling a transaction value of $2.8 billion, including the assumption of Reynolds' debt, which could not be determined. After the merger, which is expected to be completed by the end of the fourth quarter, the combined companies will retain the Reynolds and Reynolds title, and the UCS brand will be discontinued. Reynolds headquarters and principal operations will remain in Dayton, Ohio.
UCS is a provider of comprehensive solutions for computing and business needs of automobile dealerships. Reynolds and Reynolds is a provider of dealership management solutions, e-learning and consulting services. Calls to a UCS representative were not returned. A Reynolds and Reynolds spokesman referred calls to the company's 8-K filings with the Securities and Exchange Commission and declined further comment.