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Doubt surrounds the proposed take-private of Acxiom as a fear of fractured deals looms over the marketplace. Yet despite apprehension caused by the recent unraveling of deals like Harman, Genesco and Reddy Ice, a source close to the UBS camp - the bank financing the deal - said buyers ValueAct and Silver Lake Partners are continuing to work on terms and provisions for the definitive finance agreement.
With SEC requirements already satisfied, the definitive proxy is expected to come out any day now, sources close to the deal told dealReporter.
Acxiom has serious exposure to credit issuers and the residential housing market, and there are many nuances being discussed among Value Act, Silver Lake and UBS, it was said.
Both Value Act and UBS were “shocked” to see recently released Q1 numbers. On 25 July, Acxiom announced 1Q07 earnings which reflected an 88% decrease in income from operations compared to its previous quarter, as well as a net loss of USD 11.52m or USD 0.15 per share.
According to the source, UBS is “very concerned” about its ability to syndicate Acxiom’s debt. UBS examined Genesco and Acxiom individually at a senior level, said the source, and decided that Genesco carried a larger exposure to deteriorating aspects of the economy and the worsening credit market than Acxiom. However, the source noted that the bank would not like to put either of the debt from these transactions on its books.
According to the preliminary proxy, Acxiom’s proposed financing package consists of USD 1.725bn in first lien senior secured credit facilities, a USD 525m second lien senior secured credit facility, and an equity contribution of USD 760.5m. The debt commitments are set to expire on 28 December if the loan documentation has not been executed.
UBS, however, was said to have no desire to go through years of Material Adverse Clause (MAC) litigation triggered by Acxiom’s poor performance, and will wait for Value Act or Silver Lake to pull the trigger.
So far buyers have not communicated a desire to walk away from the deal, although UBS is understood to have been kept out of the loop on their plans.
ValueAct, said the source, “wants this deal much more” than UBS, and Silver Lake, according to an Acxiom investor, is utilizing too much of its time and effort on Acxiom to not be serious about the transaction.
Further, the investor commented that the MACs available to the sponsors and bank are slim, leaving little wriggle room for both. As the MAC does not relate to company performance, but rather significant changes in the business, the investor said it will be more difficult to trip, but cautioned that it does not mean UBS is incapable of pulling it.
Still, according to Acxiom’s merger agreement, a MAC can be triggered if any change were to have “a materially adverse effect on the business, operations, financial condition or results of operations of the company and its subsidiaries, taken as a whole.”
UBS does not see much room in the current contract to call for a MAC and a decision of this magnitude would have to come from UBS’s CEO due to potential reputation risk for the Swiss bank, it was said.
Should UBS be “getting shy” about this deal, the investor said it would not be because of quarterly results, as the bank would have had access to Acxiom’s books crushing all elements of surprise.
On 17 May, Acxiom announced that Silver Lake and ValueAct Capital would acquire 100% of the outstanding equity interests in the company in an all-cash transaction valued at USD 3bn, including the assumption of USD 756m of debt. Under the terms of the agreement Acxiom stockholders will receive USD 27.10 in cash for each outstanding share of stock.
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