Clayton, Dubilier & Rice plans to use a combination of bank loans and senior notes to help finance its proposed $360 million acquisition of Van Kampen Merritt Cos., the money management unit of Xerox Corp.
Donald J. Gogel, a principal at the buyout firm, said the terms, conditions, and precise mix of debt will be negotiated over the next several weeks.
Clayton is already said to have received separate verbal commitments of bank financing from Bank of New York, Bankers Trust, and Chemical Bank. Bank of New York is Van Kampen Merritt's relationship bank, while Bankers Trust and Chemical have ties to Clayton. Bankers Trust and Chemical also expressed interest in the senior note financing, as have several investment banks.
Right now, Clayton is said to be leaning toward a public offering of notes, rather than a private placement. Bankers Trust has regulatory approval to underwrite public debt offerings, but Chemical does not.
Assumption of Debt
Xerox announced the planned sale of Van Kampen Merritt late Tuesday, confirming rumors. The deal involves the assumption of debt. Clayton plans to raise $250 million of debt financing and contribute $165 million of equity from its buyout fund.
The buyout firm's biggest deal to date was its $1.5 billion acquisition last year of International Business Machines Corp.'s typewriter business. That deal was largely financed with a $1.1 billion bank credit led by Morgan Guaranty Trust Co., the commercial banking unit of J.P. Morgan & Co.
Bankers Trust and Manufacturers Hanover Trust Co., which has since merged with Chemical, declined to participate in the IBM deal. Morgan is not involved in the Van Kampen transaction.