ACCO acquires Esselte for $333 million via euro bank debt, cash

By Devika Patel

Knoxville, Tenn., Oct. 24 – ACCO Brands Corp. will use cash and euro-denominated bank debt to funds its acquisition of Esselte Group Holdings AB, a European office products company, from J.W. Childs for $333 million in cash.

The company also intends to refinance its existing senior-secured credit facilities in connection with the acquisition and will use the cash it generated in the last quarter to repay debt.

“The transaction will be financed with a new term loan facility borrowed in euros and we also will refinance our existing credit facility, both contingent upon the deal closing,” executive vice president and chief financial officer Neal V. Fenwick said on the company’s conference call announcing the acquisition.

“Our new proposed five-year facility will consist of a new $400 million multicurrency revolving credit facility, a new $300 million euro-denominated term loan A and a new $80 million Australian dollar term loan A.

“In preparation for the acquisition, we expect to use 2016 free cash flow to reduce debt. We began doing this in the third quarter when we paid down our revolver and $78 million of term loans. This, and the strong cash flow of the combined company should allow us to keep our net leverage ratio at or below three throughout the purchase integration periods.”

The acquisition is expected to be completed in early 2017.

Fenwick also said the company generated a good amount of cash in the third quarter of 2016.

“We had strong cash generation – $106 million in the quarter and $100 million for the nine months,” Fenwick said.

“Cash generation was quite favorable compared to this point in our cycle last year largely as a result of an improvement in working capital. We now expect free cash flow for the year to be in the range of $145 million.”

Financing

On Friday the company entered into a third amendment to its second amended and restated credit agreement with Bank of America, NA as administrative agent, which will provide for a five-year senior secured credit facility that will make available €300 million of term loans and establish a new $400 million revolving credit facility, thereby increasing the existing revolver by $100 million.

The restatement will also provide funds to fully repay outstanding dollar-denominated term loans under the existing credit agreement, provide funds to partially repay Australian dollar-denominated term loans under the existing agreement and continue loans in an aggregate principal amount of A$80 million.

Proceeds from the loans will be applied toward financing the acquisition of Esselte Group Holdings AB and related costs.

Bank of America Merrill Lynch, Wells Fargo Bank, NA, Barclays, Compass Bank, BMO Capital Markets Corp. and PNC Bank, Na are joint lead arrangers and bookrunners on the loans. Wells Fargo is the syndication agent, and Barclays, Compass Bank and Bank of Montreal are co-documentation agents.

ACCO Brands is a Lake Zurich, Ill.-based office supply manufacturer.

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