The price tag on a merger between US private equity firm Kohlberg & Company and large venue catering service Centerplate has been slashed because of the Kohlberg’s inability to get financing for the deal.
“The weakness in the current credit markets resulted in Kohlberg being unable to obtain financing at the same levels or terms as originally contemplated in the merger agreement” on 18 September, Centerplate said in a statement.
The exact amount of the reduction of the deal, which was valued between $185 million and $205 million, was not disclosed. Kohlberg had agreed to pay roughly $4 a share, or $58 million, to owners of Centerplate income deposit securities, a security that marries public equity shares with debt notes. That price has been reduced to $2.50 a share, Centerplate said.
As part of the deal, Kohlberg also is contributing $125 million to help pay down $25 million on Centerplate’s current term loan, as well as $25 million on its revolving line of credit. The lenders also will be paid $4.5 million in fees as part of the deal.
The deal, which is expected to close in the first quarter of 2009, is subject to approval from 50 percent of Centerplate’s shareholders.
Kohlberg’s Centerplate acquisition hit a road block in November when Cleveland-based bank National City pulled out of financing the deal. National City had agreed to provide $175 million of debt financing, consisting of a $90 million term loan facility, a $60 million revolving credit facility and a $25 million letter of credit facility.
National City backed out because events had occurred since the original deal was inked that “could reasonably be expected to have an adverse impact in a material respect on the successful syndication of the proposed senior credit facility”, the bank said in a letter to Kohlberg.
The Corsair Capital-backed bank was acquired by PNC Financial Services in October in a $5.2 billion deal. National City’s acquisition also included a $7.7 billion investment from the US Treasury under the Troubled Asset Relief Program.
American Stock Exchange-listed Centerplate provides gourmet catering services to more than 120 sports facilities, convention centers and other entertainment venues throughout the US and Canada. The company’s stock price slid in April after the company said it may halt dividend payments because of credit-related difficulties.
Westchester, New York-based Kohlberg was established by former Kohlberg Kravis Roberts co-founder Jerome Kohlberg. The firm typically invests in mid-market companies with enterprise values between $100 million and $500 million.