Debt fueling recent merger and acquisition deals

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David Allison

Editor- Atlanta Business Chronicle

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On Nov. 6, Atlanta-base bottled water giant DSS Group, owner of Crystal Springs and other big water and coffee brands, announced it would be acquired for $1.25 billion by Canada-based beverage giant Cott Corp.

To pay for the deal, Cott (NYSE: COT) did what two other companies have done recently to finance M&A deals involving Georgia companies: it got out its credit card.

Cott said it intends to finance the transaction by borrowing approximately $175 million from its asset based lending facility, issuing new debt of approximately $615 million, and assuming $350 million of DSS's notes. (Cott will also issue some new shares.) Cott said it has received financing commitments from Barclays and Credit Suisse.

Cott is not alone in using debt to finance a big acquisition. On Oct. 9, Kindred Healthcare Inc. (NYSE: KND) said it would buy Atlanta-based home health, hospice and community care services company Gentiva Health Services Inc. in a $1.8 billion deal. Kindred said it expects to finance the deal with $1.3 billion to $1.4 billion of unsecured notes. Citigroup Global Markets Inc., JPMorgan Chase Bank N.A. and J.P. Morgan Securities LLC have committed to the financing.

And in August, Atlanta-based FleetCor Technologies Inc. (NYSE: FLT) announced a deal to buy Comdata Inc. for $3.45 billion. FleetCor financed the acquisition with approximately $2.4 billion of new debt, and issuing new shares. Bank of America is financing the deal. FleetCor's chief financial officer said in an Aug. 12 press release about the deal that "While our financial leverage will increase, we expect to de-lever quickly from the combined cash flow of the businesses."