Dean Foods to tap existing debt for Horizon Organic acquisition

By Sara Rosenberg

New York, June 30 -Dean Foods Co. plans on drawing on its $800 million revolver to help fund the acquisition of Horizon Organic Holding Corp., sources said. No new bank debt or bond financing is currently expected to be obtained in connection with this acquisition, sources added.

The company's existing term loan was quoted at par bid, 101 offered on Monday, although it was hard to tell if there was any movement since it was a quiet day in the secondary that resulted in a very wide market, according to a trader.

The company could not be reached prior to press time to confirm this information.

On Monday, Dean Foods announced that it will acquire the 87% equity interest in Horizon Organic it does not currently own for a cash price of approximately $216 million, or $24 per share plus the assumption of approximately $40 million in debt. The transaction, which was approved by the board of directors of both companies, is expected to close during the fourth quarter of 2003.

"We are extremely pleased to add the number one organic milk and dairy brand to our portfolio of branded products," said Gregg Engles, chairman and chief executive officer of Dean Foods, in a news release. "Our acquisition of Horizon Organic evidences our commitment to the growth of healthy, better-for-you products. We are also very excited to have the opportunity to join forces with the Horizon Organic management team and continue to build upon their passion and commitment to organic foods."

Dean Foods expects the transaction to be neutral to slightly accretive to earnings in the first full year after closing.

Dean Foods is a Houston processor and distributor of milk and other dairy products.

Westlake Chemical Corp.'s recently launched $350 million credit facility, although failing to enthuse all market participants, has apparently received enough interest for price talk to be lowered. Bank of America is the lead arranger on the deal.

The facility consists of a $150 million term loan that currently has price talk of Libor plus 400 to 425 basis points, lowered from previous talk of Libor plus 425 to 450 basis points, and a $200 asset-based revolver. There are no upfront fee, according to sources.

The term loan, according to one market professional has a light covenant package and is secured by plant, property and equipment.

"I won't look at it because of the light covenant package," the professional said. "One of the attractions of bank loans is good covenants.

"They cut back price talk so they must have seen interest," the professional added.

This is not a surprise though considering the lack of new issuance and the amounts of bank debt repayments that have been seen recently.

"Institutional investor demand continues to reign supreme in the high yield loan market, as evidenced by rapid oversubscriptions and significant reverse price-flex activity," a Banc of America Securities research report stated. "High yield bond repayment of loans has contributed to this strong institutional demand. According to BAS Loan Syndicate, in 2002, issuers repaid $11.9 billion of loans via bond proceeds, of which $3.0 billion represented institutional tranches. Thus far in 2003, $11.9 billion of loans have been repaid via bond proceeds, however; $5.5 billion has represented repayment of institutional tranches, putting more money into the pockets of already cash-rich investors."

Westlake is a Houston manufacturer and supplier of petrochemicals, polymers and fabricated products.

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