Australian distributor Dicker Data has taken on $140 million in debt to fund the $65.5 million takeover of Express Data.
The board has established a $130 million credit line from Westpac, which covers both the February 11 acquisition of Express Data and the working capital required to combine the two companies.
According to a company statement the funding will occur in two parts.
Initially, the $65.5 million will be in the form of a bridging facility for a period of 18 days, whereby the purchase price will be paid to the vendor.
This was required because the vendor, Dimension Data, would not assist in facilitating the financial assistance requirement of the Corporations Act.
At the expiry of the bridging facility, the amounts owing will be repaid and replaced by a receivables purchase facility.
Once the takeover is completed on April 1 the combined receivables will be used for the $130 million Westpac facility.
This will repay the bridging facility and the excess funding will be available for working capital, according to a company statement.
The Westpac loan will replace the current St George working capital facility.
The company has also secured a loan of $10 million from Investec to provide breathing space during integration of the two companies.
The loan is intended to be repaid by 2015.
The $25 million Macquarie Bank facility used for HP purchases remains in place and is unaffected by the new Westpac facility.
The company has also introduced a dividend reinvestment plan.
“We will maintain our 100 per cent dividend payout policy, but will give shareholders the option to take those dividends as shares rather than cash,” a company statement said.
“All directors of DDR will participate in the dividend reinvestment plan for the full value of their holdings.
“The expectation is that 95 per cent of FY15 after tax profts will be retained and used to pay down debt.”
It is also the intention of the board to issues shares to retire the remains of the Express Data acquisition debt on September 15.
“The target price for these shares will be over $2,” a company statement said.
“We believe that the company’s performance and historic multiples will support this strategy and price.
“We expect this to represent up to 20 per cent of the issues capital there by taking public ownership in DDR to approximately 25 per cent.”