Magazine article American Banker

Pillsbury Gets $500 Million Credit for Acquisition

Magazine article American Banker

Pillsbury Gets $500 Million Credit for Acquisition

Article excerpt

CHICAGO -- The Pillsbury Co.'s planned purchase of Diversifoods Inc. for $11.50 a share is expected to cost about $370 million, and the funds will be provided by a $500 million revolving credit agreement with six banks.

Chase Manhattan Bank is acting as agent. The other participants are Morgan Guaranty Trust Co., Citibank, Bank of America, Continental Illinois National Bank and Trust Co., and First National Bank of Chicago.

Pillsbury has three pricing options for the deal. The first is the prime rate, the second is a certificate of deposit rate plus one-half percentage point (this increases to five-eighths of a point after 1987), and the third is the London interbank offered rate plus three-eighths of a point (this increases to one-half point after 1987).

The commitment fee calls for Pillsbury to pay 0.25% on the unused portion of the credit until 1987. Beginning in 1987, Pillsbury must repay the outstanding principal under the credit agreement in three equal annual installments.

The deal also calls for the First Boston Corp., the dealer-manager in the transaction, to receive an advisory fee of $300,000 and a fee of $1.7 million if within the next 24 months more than 50% of the Diversifoods shares are acquired by Pillsbury.

While no plan has yet been made for repayment of the borrowing, it is expected that the company will use internally generated funds or the sale of certain securities to meet its obligations.

Pillsbury's businesses include Burger King in its restaurant division, a consumer foods operations, and an agricultural products business. …

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