This excerpt taken from the NAFC 8-K filed Apr 21, 2005.
Food Distribution Acquisition
On March 31, 2005 the Company announced it had completed the purchase from Roundys Inc. of the net assets, including customer contracts, of the wholesale food distribution divisions in Westville, Indiana, and Lima, Ohio, and two retail stores in Ironton and Van Wert, Ohio, for approximately $225 million.
The Westville and Lima Divisions represent approximately $1.0 billion in annual food distribution sales, servicing approximately 500 stores principally in Indiana, Illinois, Ohio and Michigan. The Company expects the acquisition will be immediately accretive to earnings. Depending on the purchase accounting allocations and related amortization, operating profits, defined as sales less cost of sales and selling, general and administrative expense, are expected to increase by $31 to $33 million during the first twelve months following the acquisition, net of implementation costs of approximately $3 million. This estimate includes a portion of the annual synergies expected to be realized over several years. No facility closures are expected given the strategic fit of these distribution centers into the Nash Finch network.
The acquisition is a key element of our Food Distribution strategy, said Ron Marshall. We gain successful customers with a proven track record within their market areas as well as the
opportunity to expand marketing and merchandising programs across our network. We are committed to helping our customers compete in an ever changing marketplace.
The acquisition was financed through the private placement of senior subordinated convertible notes that was completed on March 15, 2005 as well as borrowings under the Companys bank credit facility. The convertible offering represented $150.1 million in aggregate gross proceeds (or $322.0 million aggregate principal amount at maturity) of notes due 2035. The Company granted the initial purchasers a 30-day option to purchase up to an additional 10% of the aggregate principal amount at maturity of the notes. This option was not exercised.
Cash interest at the rate of 3.50% per year is payable semi-annually on the issue price of the notes until March 15, 2013. After that date, cash interest will not be payable and original issue discount for non-tax purposes will accrue on the notes at a daily rate of 3.50% per year beginning on March 15, 2013 until the maturity date of the notes. On the maturity date of the notes, a holder will receive $1,000 per note.
The notes will be convertible at the option of the holder, only upon the occurrence of certain events, at an initial conversion price of $50.05 per share, representing a 36.50% premium over the last reported sale price of our common stock on March 9, 2005, which was $36.67. Upon conversion, the Company will pay the holder the conversion value in cash up to the accreted principal amount of the note and the excess conversion value, if any, in cash, Nash Finch common stock or both, at the option of the Company.
The Company may redeem all or a portion of the notes for cash at any time on or after the eighth anniversary of the issuance of the notes. Holders may require the Company to purchase for cash all or a portion of the notes on the 8th, 10th, 15th, 20th and 25th anniversaries of the issuance of the notes. In addition, upon specified change in control events, each holder will have the option, subject to certain limitations, to require the Company to purchase for cash all or any portion of such holders notes.
This excerpt taken from the NAFC 8-K filed Mar 3, 2005.
Food Distribution Acquisition
The Company announced on February 24, 2005 that it had signed an agreement with Roundys, Inc. to acquire the net assets, including customer contracts, of its wholesale food distribution divisions in Westville, Indiana and Lima, Ohio, and two retail stores in Ironton and Van Wert, Ohio, for approximately $225 million.
The Westville and Lima Divisions to be acquired represent approximately $1.0 billion in annual food distribution sales, servicing over five hundred customers, principally in Indiana, Illinois, Ohio and Michigan. The distribution centers to be acquired fit well with the Companys existing network and no facility closures are anticipated. The strategically located distribution centers will allow the Company to expand merchandising programs in a variety of areas including the distribution of produce and meat, general merchandise, and health and beauty care. The Company expects that the acquisition will result in productivity improvements and buying efficiencies, which will be realized over several years. Examples of productivity improvements include the better balancing of transportation across the Companys distribution network to reduce miles and equipment, enhanced warehouse capacity utilization, and the reduction of outside storage space. The Company expects that the acquisition will be immediately accretive to earnings. Specifically, depending on the timing and nature of its integration process, the Company believes that as a result of the acquisition operating earnings, defined as sales less cost of sales and selling, general and administrative expenses, will improve by approximately $31 to $33 million, net of implementation costs of approximately $3 million, during the twelve months following closing of the transaction. This estimate includes a portion of the more than $8 million in annual synergies expected to be realized over several years. The impact on earnings per share will depend upon the nature and cost of the related financing, as well as the purchase accounting allocations and related amortization.
The closing of the transaction is subject to customary conditions, including the expiration
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and financing. The Company intends to finance the acquisition with borrowings under its existing bank facility and a debt or convertible debt financing.
Continued Debt Reduction
The Company announced during the fourth quarter that it had established a $300 million Senior Secured Credit Facility and completed the redemption of its 8.5% Senior Subordinated Notes Due 2008. These strategic transactions reduced the Companys effective interest rate. In addition, the Credit Facility provides additional operational flexibility and the ability to prepay debt without cost. The Companys significant cash flow improvement resulted in a 30 percent reduction in total debt since1999 and a significantly lower leverage ratio. At the end of fiscal 1999, the Companys leverage ratio was 4.0 times Consolidated EBITDA(1), and it has improved to 1.9 times at the end of the fiscal year 2004. Although the announced acquisition will increase the Companys leverage ratio, the Company anticipates the acquisition will result in additional cash flows that will allow deleveraging over time.