Publicis Groupe gets bridge loan for $4.4 billion Epsilon acquisition

By Devika Patel

Knoxville, Tenn., April 15 – Publicis Groupe SA plans to use debt under a committed bridge loan and cash on hand to acquire Alliance Data Systems Corp.’s Epsilon business for a total cash consideration of $4.4 billion.

The debt is expected to have about a 4% interest rate and will be structured in order to extend the company’s maturity profile, without affecting current credit ratings.

The company expects to de-lever over the next four years and be fully de-levered within that timeframe.

“We already obtained a firm financing commitment from Citi[group Global Markets Inc.] and BNP [Paribas Securities Corp.], which have underwritten a 12-month bridge loan that can be renewed for two additional periods of six months,” executive vice president and chief financial officer Jean-Michel Etienne said on the company’s conference call announcing the acquisition on Monday.

“This bridge loan will be refinanced as soon as possible with long-term financing sources and partially with cash already on our balance sheet for $650 million.

“The refinancing will be implemented with a view to extend our debt maturities and therefore we can expect an increase of our weighted average cost of debt as a result of this extension of [our] maturity profile.

“Our model has been built on a conservative assumption, using a 4% interest rate on the new debt,” he said.

The company will issue the new debt in euros, but will swap out “a significant portion” into dollars.

“Most of the funding is expected to be raised in euros, of which a significant portion will be swapped into U.S. dollars in order to match the currency of our cash flows,” Etienne said.

The company intends to keep its balance sheet “very strong,” with its current BBB+/Baa2 credit ratings unchanged.

“The objective is to keep a very strong balance sheet, and it will be even stronger over time given the significant cash flow generation of the pro forma combined group,” Etienne said.

“We aim at maintaining our BBB+ or Baa2 current ratings unchanged over time,” he said.

“Overall, we expect to fully de-lever our balance sheet four years after the completion of this acquisition,” Etienne said.

The acquisition is expected to close in the third quarter.

Publicis is a communications group based in Paris.

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