UBS is leading a $500 million facility to back Advent International's $545 million acquisition of Boart Longyear Group, a part of Anglo Ferrous Metals, from Anglo American. Boart Longyear provides services and products to the natural resource industry. The facility consists of a $75 million revolver priced at LIBOR plus 2 3/4%, a $300 million first lien priced at LIBOR plus 2 3/4% and a $125 million second lien priced at LIBOR plus 7%.
Dave McKenna, a partner at the private-equity fund said exploration spending of mining companies is driving the business. The demand for raw materials that Boart produces has been increasing because of demand in areas such as China and India. "When we look at that dynamic from a macro-economic view, we like that long-term trend, driven by these big economies growing and populations consuming more of these materials," he said. Further diversification can occur in areas such as environmental, water and energy drilling, he added.
In March Anglo announced it had received interest from groups about buying Boart and looked into whether shareholder value would be maximized if the group was sold. A spokeswoman for Anglo American said there will not be any changes at the company because Boart Longyear was a small part of its business.
Robert Martin, Boart Longyear cfo of the Americas region, said the financing was handled by the Anglo American's global office located in South Africa. He explained that when Anglo first went public in 1999, it had mentioned Boart as one of a number of noncore businesses it may sell.
McKenna described the decision to buy this way: "It's a premier company in a rapidly growing market and we believe there is a lot we can do to build on this platform in terms of diversifying the business further, through acquisitions and organic initiatives." He explained that Boart has been acquiring two to four companies in the $5-30 million revenue range each year and that Advent plans on supporting Boart's management in continuing those "bolt-on" acquisitions which help diversify the business.
Advent has a strong relationship with UBS, working together on a number of projects in the past and McKenna anticipates the two groups working together again in the future. "They have an excellent financing team and they also have a terrific industry group in the mining area, so we not only retained them as a financing agent but also as an M&A advisor," McKenna said. This is the first deal Advent is investing in out of its new $3.3 billion buy-out fund GPEV, which closed in April and is focused on investments in Western Europe and the Americas. "It's a great fit with what we do," he said.