Scotia Capital and the Bank of Montreal are out with a new credit to back Mega Bloks' $350 million acquisition of Rose Art Industrials. The bank deal comprises a five-year, $100 million revolver and a five-year, $40 million term loan "A." Both pieces are priced at LIBOR plus 2 1/4% and are being syndicated in Canada. A seven-year, $260 million "B" term loan, priced at LIBOR plus 2 1/4%, is being syndicated exclusively to the U.S. institutional market. Within just a week of syndication the deal was already oversubscribed. The books are expected to close on Wednesday. The acquisition closed on July 26.
A banker explained that Canada has revolver requirements for its companies, but that Mega Bloks also wanted to tap the U.S. institutional market, where it could get longer maturities and less scheduled amortization, thus syndicating the two separate deals.
Moody's Investors Service assigned a Ba3 and Standard & Poor's assigned a BB- to the facility. Moody's said the acquisition price includes $35 million of Rose Art debt. The cost of the transaction will be financed by the loans, $20 million of Mega Bloks' common shares sold to Rose Art principals and $55 million of privately placed subscription receipts that were exchanged for Mega Bloks common equity at the end of July.
Headquartered in Montreal, Mega Bloks creates educational construction toys for children. Rose Art, based in Livingston, N.J., is the number two brand in the arts & crafts category in the U.S. and the leader in the magnetic building sets category. It also sells school supplies and an assortment of games and puzzles. It had sales of $238 million and adjusted EBITDA of $50 million in the 12 months ending March 31. Alain Tanguay, Mega Bloks v.p. and cfo, could not be reached for comment. Calls to Rose Art were not returned.