DLJ Will Wear Many Hats In $790 Million Buyout Deal

Donaldson, Lufkin & Jenrette Inc. is expected to finance its merchant bank's acquisition of Thermadyne Holdings Corp. with a combination of bank debt, high-yield bonds, and equity that it plans to lead manage.

DLJ said Wednesday that its merchant bank, DLJ Merchant Banking Partners LP, plans to buy a majority stake in Thermadyne, a St. Louis-based maker of cutting and welding products, for $790 million.

DLJ Merchant Banking Partners II, the firm's $3 billion private equity fund, will own 82% of Thermadyne when the deal closes, DLJ said.

Several investment and commercial banks, including Chase Manhattan Corp., BT Alex. Brown & Co., and Goldman Sachs & Co., have established merchant banking units in recent years. The leveraged buyouts and acquisitions the funds sponsor generate opportunities for their affiliate banks to underwrite lucrative high-yield bonds and loans.

DLJ's loan and bond capabilities have been a boon to the merchant banking unit, said William F. Dawson Jr., principal at DLJ Merchant Banking Partners LP.

"We can go to a company like Thermadyne, which is a public company, work with them closely for two or three months and not suffer any leaking of the story, and propose a fully financed package to the board," said Mr. Dawson.

A perennial leader on junk-bond league tables, DLJ established its own syndicated lending operation in late 1996. Rising rapidly, the firm placed sixth among highly leveraged lenders last year, leading more than $4.17 billion in loans priced at least 250 basis points over the London interbank offered rate, according to Securities Data Co.

Thermadyne has had a relationship with DLJ since 1987, said Robert Maddox, vice president and comptroller of Thermadyne. "They had a lot of history with the company predating this transaction," he said.

Gleacher Natwest Inc., which also had a relationship with Thermadyne, acted as its financial adviser.

No stranger to leverage, Thermadyne went through a series of leveraged buyouts and recapitalizations in the late 1980s that left it with an overwhelming amount of debt, culminating in a December 1993 Chapter 11 bankruptcy filing that lasted 60 days.

"We had a very bad capital structure and a great operating company, but no operating company could have covered the amount of leverage that was on the company at the time," said Mr. Maddox.

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