Omnicare gets $2.4 billion credit facility commitment for NeighborCare takeover bid

By Sara Rosenberg

New York, June 4 - Omnicare Inc. received a commitment letter for a $2.4 billion credit facility from a syndicate of five banks to help fund its offer to purchase all of the outstanding shares of NeighborCare Inc. common stock for $30 per share in cash.

JPMorgan, Lehman Brothers and SunTrust Capital Markets are the joint bookrunners and joint lead arrangers, with JPMorgan listed on the left. JPMorgan and Lehman are co-syndication agents, SunTrust is administrative agent, and CIBC and Merrill Lynch are co-documentation agents.

JPMorgan committed 27% of the deal, Lehman committed 27%, SunTrust committed 17%, CIBC committed 17% and Merrill Lynch committed 12%, according to a commitment letter filed with the Securities and Exchange Commission on Friday.

The facility consists of a $700 million five-year term loan, a $1.1 billion 364-day loan and a $600 million five-year revolver with a $50 million letter-of-credit sublimit.

The term loan amortizes at a rate of 10% in year one, 15% in year two and three, 20% in year four and 40% in year five.

If the merger is completed on the closing date of the 364-day facility, the entire facility will be available in a single drawing. However, if the merger is not completed on the closing date, then the 364-day loan will be available in two drawings, one on the closing date and one on the completion of the merger.

The interest rate on the credit facility can range from Libor plus 75 basis points to Libor plus 250 basis points, depending on ratings. If the deal is rated Baa1/BBB+ then the rate is Libor plus 75 basis points; if the deal is rated Baa2/BBB then the rate is Libor plus 100 basis points; if the deal is rated Baa3/BBB- then the rate is Libor plus 112.5 basis points; if the deal is rated Ba1/BB+ then the rate is Libor plus 150 basis points; if the deal is rated Ba2/BB then the rate is Libor plus 200 basis points; and if it's rated lower then the rate is Libor plus 250 basis points, the commitment letter said.

The commitment fee on the revolver, and the 364-day loan if it not fully drawn at closing, can range from 17.5 basis points to 50 basis points depending on ratings. If the deal is rated Baa1/BBB+ then there's a 17.5 basis points commitment fee; if the deal is rated Baa2/BBB then there's a 25 basis points commitment fee; if the deal is rated Baa3/BBB- then there's a 30 basis points commitment fee; if the deal is rated Ba1/BB+ then there's a 35 basis points commitment fee; if the deal is rated Ba2/BB then there's a 50 basis points commitment fee; and if it's rated lower then there's a 50 basis points commitment fee.

The 364-day loan must be repaid with 100% of the net proceeds of any sale or issuance of equity and 100% of the net proceeds of certain additional debt incurred.

Total funds needed to finance the acquisition will be about $1.9 billion consisting of $1.335 billion for the acquisition of all of the issued and outstanding common stock of the NeighborCare, $250 million for the purchase of NeighborCare's 6.875% senior subordinated notes due 2013, $151.8 million for the refinancing of Omnicare's existing term loan, about $110 million for the refinancing of Omnicare's existing revolver, $33.8 million for the estimated premium payable in connection with the tender for the 6.875% notes and $53.7 million for fees and expenses.

The $700 million term loan and the $1.1 billion 364-day loan, along with about $134.3 million drawn under the new revolver, will be used to fund these requirements, the commitment letter added.

On May 24, Omnicare announced that it sent a letter to NeighborCare offering to buy all of the outstanding shares of NeighborCare common stock for $30 per share in cash. However, NeighborCare's board of directors unanimously rejected the unsolicited proposal saying that it was substantially similar to the proposal previously rejected by NeighborCare on April 20 and that it was "blatantly opportunistic" and not in the best interest of NeighborCare and its shareholders and other constituencies, a NeighborCare news release said.

In reaction to the rejections, Omnicare has now opted to take its proposal to shareholders as opposed to management.

The tender offer for the common stock will expire on July 7.

Omnicare is a Covington, Ky., provider of pharmaceutical care for the elderly. NeighborCare is a Baltimore institutional pharmacy provider serving long-term care and skilled nursing facilities.

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