Epicor Software plans $945 million credit facility, $465 million bonds

By Sara Rosenberg

New York, April 11 - Epicor Software Corp. revealed that it will be getting a $945 million senior secured credit facility and $465 million of senior unsecured notes due in 2019 to help fund its purchase by Apax Partners and the acquisition of Activant Solutions Inc. by Apax, according to an SC TO-T filed with the Securities and Exchange Commission on Monday.

The credit facility consists of a $75 million five-year revolver and an $870 million seven-year covenant-light term loan.

Pricing on the revolver can range from Libor plus 325 basis points to 375 bps and the commitment fee can range from 50 bps to 75 bps, based on leverage, and pricing on the term loan is anticipated to be Libor plus 375 bps with a 1.25% Libor floor.

The revolver is expected to be offered at an original issue discount of 991/2, and the term loan is expected to be offered at a discount of 99.

Amortization on the term loan is 1% per annum with the balance due at maturity.

The credit facility includes a $150 million accordion feature.

The notes are backed by a commitment for a $465 million senior unsecured bridge loan that has initial pricing of Libor plus 725 bps, stepping up by 50 bps after three months and each three month period thereafter. There is a 1.25% Libor floor and a pricing cap of 11%, increasing by 50 bps after four months.

Bank of America Merrill Lynch and RBC Capital Markets LLC are the joint lead arrangers and bookrunners on the financing, with RBC the administrative agent on the credit facility and Bank of America is the administrative agent on the bridge loan.

Other funds for the transactions will come from $647 million in equity.

Under the agreements, Apax is buying Epicor for $12.50 per share in cash and Activant from Hellman & Friedman LLC, Thoma Bravo, LLC and JMI Equity. All of Activant's outstanding shares and stock options will be acquired for cash and, at close, all of Activant's outstanding 9½% senior subordinated notes will be redeemed and its senior secured debt will be repaid.

The purchaser estimates that it will need up to about $715 million to purchase all of the shares and to pay related fees and expenses and an additional $267 million to repay debt of Epicor. It is also estimated that $391 million will be needed to consummate the Activant merger and to pay related fees and expenses, as well as an additional $503 million to repay Activant debt.

In order to complete the Epicor acquisition, Apax commenced a tender offer for Epicor's shares. In the event that the minimum tender condition is not met, and in certain other circumstances, the parties have agreed to complete the transaction through a one-step merger after receipt of Epicor shareholder approval.

Epicor has a go-shop period through May 4 as part of its agreement with Apax.

Apax intends to combine Activant with Epicor to create a provider of enterprise applications focused on the manufacturing, distribution, services and retail sectors. Following completion of the merger, the combined company will be called Epicor Software Corp.

The acquisition of Activant is conditioned upon the concurrent closing of the acquisition of Epicor, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.

Closing on the transactions is expected to take place in the second quarter.

The combined company will have $825 million in annual revenues.

Epicor is an Irvine, Calif.-based provider of enterprise business software services. Activant is a Livermore, Calif.-based technology provider of ERP and point-of-sale software for mid-market retailers and distributors.

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