Herman Miller gets $1.75 billion financing for $1.8 billion Knoll buy

By Devika Patel

Knoxville, Tenn., April 19 – Herman Miller, Inc. has secured $1.75 billion of senior secured revolving and term loan credit facilities with Goldman Sachs & Co. LLC for its planned $1.8 billion cash and stock acquisition of Knoll, Inc.

The company also expects to use cash on hand in addition to the new debt, consisting of $1.25 billion in term loan facilities, to fund the cash portion of the acquisition. There will also be a new $500 million revolving credit facility that is expected to remain undrawn post-closing.

Management expects to de-lever quickly and achieve $100 million of run-rate cost synergies within two years.

“To finance the transaction, we have a commitment for $1.75 billion of senior secured revolving and term loan credit facilities, including $1.25 billion of term loan facilities and a $500 million revolving credit facility expected to be undrawn at close,” executive vice president and chief financial officer Jeffrey Stutz said on the company’s conference call announcing the business combination on Monday.

“Following the transaction, we expect the net debt to EBITDA ratio will be approximately 2.3x before synergies and 2.1x after including a 50% synergy credit,” Stutz said.

That number will come down, as the company will be focused on deleveraging and expects to de-lever meaningfully within the first year.

“Our initial focus is going to be on deleveraging,” Stutz said.

“We expect the cash flows from the combined business to allow us to de-lever meaningfully within the first year,” Stutz said.

Within two years, run-rate cost synergies are expected to be $100 million.

“The transaction is expected to generate $100 million of run-rate cost synergies within two years of closing,” president and chief executive officer Andi Owen said on the call.

Management expects the balance sheet to remain strong with abundant liquidity and flexibility.

“The transaction will allow us to maintain our strong balance sheet and provide ample liquidity and flexibility to invest in growth and innovation in an evolving marketplace,” Stutz said.

Knoll shareholders will receive $11 in cash and 0.32 Herman Miller common shares for each Knoll common share they own.

Based on Herman Miller’s five-day volume weighted average price of $43.94 per share, the transaction terms imply a purchase price of $25.06 per Knoll share, representing a 45% premium to Knoll’s closing share price on April 16.

Upon completion of the combination, Herman Miller shareholders will own approximately 78% of the combined company and Knoll shareholders will own approximately 22%.

The acquisition is expected to close by the end of the third quarter of calendar year 2021.

Herman Miller is an office furniture and equipment manufacturer based in Zeeland, Mich. Based in East Greenville, Pa., Knoll makes home and workplace furnishings, accessories, textiles and leathers.

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