Ecolab Inc. has initiated a $5 billion offering of investment-grade bonds intended to finance its planned acquisition of CoolIT Systems Inc., the company developing cooling technology for data centers. The new bond sale follows earlier efforts by the firm to place a smaller amount of notes.
Company syndication activities earlier in the process had targeted roughly $4 billion of notes, according to people familiar with the matter. The final package emerged as a four-part offering with maturities ranging from three years to 10 years.
During the syndication, Ecolab removed a floating-rate tranche from the transaction. A person with knowledge of the deal said the longest-tenor fixed-rate note in the package was set to yield 0.73 percentage point over comparable Treasury securities - a tightening from initial discussion levels that had been around 0.95 percentage point.
The bond proceeds are earmarked to help fund Ecolab's previously announced agreement to acquire CoolIT Systems from funds managed by KKR & Co. The purchase price for CoolIT is $4.75 billion, and the companies expect the transaction to close in the third quarter.
In addition to the bond offering, Ecolab disclosed last month that it had entered a term credit agreement establishing a loan facility to contribute toward financing the acquisition. That credit agreement, together with the bond issuance, forms the broader financing package aligned with the timing of the planned close.
The transaction details reported during syndication - including the dropped floating-rate tranche and the revised pricing on the longest-dated note - reflect adjustments made as Ecolab moved to secure the debt financing needed to complete the purchase. The company has combined the loan facility and the bond sale as the primary mechanisms to fund the CoolIT acquisition.
Financing snapshot
- Size of bond offering: $5 billion
- Structure: four-part offering with maturities of three to 10 years
- Floating-rate tranche: dropped during syndication
- Pricing on longest-tenor note: 0.73 percentage point over Treasuries (initial talk about 0.95 point)
Acquisition overview
- Target: CoolIT Systems Inc., developer of cooling solutions for AI data centers
- Seller: funds managed by KKR & Co.
- Purchase price: $4.75 billion
- Expected close: third quarter
As Ecolab progresses through syndication and finalizes its financing mix, the company is relying on the bond sale and existing credit arrangements to fund the transaction according to the timetable it has disclosed.