Fremont Partners and lead agent bank UBS Warburg opted for a non-aggressive pricing structure to help syndicate the $160 million credit facility backing the $300 million acquisition of Nellson Nutraceutical, an Irwindale, Calif., nutrition bar and product maker. Oversubscription during syndication enabled UBS to flex pricing down and increase the size of the loan by $15 million.
"We looked at the market and saw that a lot of deals were struggling, so we asked, why are they struggling?" said Bill Lenihan, principal at Fremont. He explained that Fremont decided to hit the market with more attractive pricing so lenders would more readily consider the facility. He noted that the firm had hoped to reduce pricing on the line, as it later did.
"You don't see a lot of companies like [Nellson] in the present market. This business performed better than people expected," Lenihan noted. He stated that Nellson is a successful company with strong market share and organic growth despite the presently rough market conditions. "I think the company sold itself," he said. Nellson is a very attractive demographic for Fremont, Lenihan noted, explaining that several of Fremont's senior executives have worked previously in the food industry. Along with Nellson's appeal of being a leader in its market, Fremont is also drawn to the fact that Nellson's management was willing to invest in partnership with Fremont, he noted.
The facility includes a $145 million six-year, "B" term loan and a seven-year, $15 million revolver, both priced at LIBOR plus 4%, and 50 basis points lower than the spread at launch. In addition to the facility, San Francisco-based Fremont used $155 million in equity to fund the buyout from Artal Luxembourg. The revolver will remain undrawn and the new line will constitute Nellson's only piece of debt. Nellson generates a substantial amount of cash flow and Fremont expects that the company will pay off its debt well before maturity as it has in the past, Lenihan commented. He added that the firm used bank debt for the buyout because it was more economic and attractive than mezzanine financing. Fremont selected UBS to lead the debt because the bank was involved directly with the acquisition, he added.