Patterson Dental Co. has tapped Bank One and Bank of America to lead the debt financing to back the $575 million acquisition of AbilityOne Products Corp., according to Stephen Armstrong, cfo of Patterson. He said Patterson will likely use a bridge loan to close the transaction, and that he expects to have the permanent structure of the financing in place within six to 10 weeks after the close. AbilityOne is a rehabilitative supplies distributor to the physical therapy market.
Armstrong said Patterson, a St. Paul, Minn.-based dental and veterinary medical supplier, is waiting for the banks to present it with financing options and has been told that all debt markets are potential sources. "It could be a combination of a bank facility, private debt [and] public debt. We're not sure what the end project will look like yet," said Armstrong. "We are looking for the lowest cost with the greatest flexibility. The cash flow of the business has been quite strong, and it could be strong enough that we could be out of the debt in less than five years."
Armstrong said while Patterson has historically been an equity-financed company, the decision to use debt financing this time around was based on simple math. "The expense of using debt financing is a lot less than using equity," said Armstrong. Patterson's similarly priced acquisition of Webster Veterinary Supply in 2001 was an all-cash transaction. "We have been in a very enviable position of having plenty of cash to take care of our transactions in the past," said Armstrong.
Bank One and B of A are relationship banks for Patterson, said Armstrong, explaining why the two banks were chosen. "We've been doing work with Bank One through internal customer financing and with B of A's mergers and acquisitions side in analyzing the transaction. It just seemed a logical step forward [to use the same banks] rather than bring new people into the process," said Armstrong. "We try to go to banks that have provided some help to us over the years." Bank One and B of A bankers did not return calls.