Hillenbrand might issue long-term debt to fund K-Tron acquisition

By Jennifer Lanning Drey

Portland, Ore., Jan. 11 - Hillenbrand Inc. signed a definitive merger agreement to acquire K-Tron International, Inc. for approximately $435 million and expects to have enough cash on hand and credit facility capacity at the time of closing to fund the transaction, Cynthia Lucchese, chief financial officer of Hillenbrand, said Monday during a company conference call held to discuss the newly announced transaction.

However, the company is willing to take additional measures to fund the acquisition or gain more flexibility if necessary, she said.

"We are prepared, if we need to, to go out and get a little bit of extra room there, whether it be through extending our credit facility or doing a small long-term debt issuance of some sort or not," Lucchese said in response to a question posed following company management's formal remarks.

The purchase price is $390 million after being adjusted for K-Tron debt and cash on hand at Oct. 3. The final net purchase price will be calculated based on K-Tron's balance sheet at the date of close.

Hillenbrand had approximately $330 million of available borrowing capacity under its revolving credit facility at the end of September, she said.

"We expect to be able to pay down the acquisition debt rapidly, utilizing the strong operating cash flows that both Batesville and K-Tron are expected to generate," Lucchese said.

The company expects to complete the transaction at the end of March.

400 companies reviewed

Prior to making an offer for K-Tron, Hillenbrand reviewed more than 400 companies and deeply evaluated about two dozen. The company selected K-Tron because it met all of its pre-selected criteria, Kenneth A. Camp, chief executive officer of Hillenbrand, said during the call.

One particular attribute of K-Tron is that its two business lines offer pathways for additional organic revenue growth in existing markets as well as potential new markets and geographies, he said.

"K-Tron has a strong balance sheet and healthy cash position that when combined with the significant financial resources at Hillenbrand, will allow us to continue to pursue profitable growth opportunities," Lucchese added later during the call.

The boards of directors of both companies have unanimously approved the merger agreement.

Based in Batesville, Ind., Hillenbrand is the holding company for Batesville Casket Co.

K-Tron designs, produces, markets and services material handling equipment and systems through two separate business lines. The company is based in Pitman, N.J.

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