DSG's $700 Million Bond Sale Would Fund $35.00 Buyout And Lift Leverage To 4.5 Times
An 8-K and investor slides show the take-private debt would push net leverage above the company's 3.5 to 4.0 times long-term target.
Distribution Solutions Group said in an 8-K filed Monday that a company controlled by its majority owner, LKCM Headwater Investments, plans to offer $700 million of Senior Notes due 2032. The money would help pay $35.00 a share in cash to minority holders and would leave the company more indebted than its own target.
What the filing says
The notes would first be issued by Eclipse Acquisitions Merger Sub, a newly formed corporation controlled by LKCM Headwater. Proceeds would sit in escrow until conditions are met, including the merger closing at about the same time. The offering is subject to market conditions.
At closing, the issuer merges into DSG, which takes over the notes. DSG's subsidiaries that are obligors under its existing credit agreement would then guarantee them. The notes are offered only to qualified institutional buyers and to non-U.S. persons, and are not registered under the Securities Act.
The investor presentation puts the share purchase at $358 million, alongside $140 million of new equity from LKCM Headwater. The rest of the money would repay $195 million of Term Loan A and $50 million of revolver borrowings, cover $26 million of fees and expenses, and add $211 million of cash to the balance sheet.
What it changes
Pro forma total net leverage would reach 4.5 times adjusted earnings, the presentation says. The company's long-term target is 3.5 to 4.0 times.
The presentation frames going private as a way to shed public-company constraints, saying execution on strategic opportunities has been limited by short-term expectations and inflexibility. LKCM Headwater expects to speed up acquisitions as a private owner.
The document lists deals in motion. American Fasteners was bought on September 1 for about $44 million, and a distributor deal of about $145 million is expected near term. Five more targets under evaluation carry combined consideration of $460 million to $510 million. The company estimates about $74 million of combined pro forma adjusted EBITDA (a measure of operating profit) from American Fasteners and the potential targets.
DSGR closed at $34.98 on Friday, up about 0.1%, before the filing was accepted Monday morning, so that move does not reflect the news. The merger agreement is dated July 15, 2026.
What to watch
DSG stockholders must still approve the merger, and the company says it intends to file a definitive proxy statement for the special meeting. The 8-K warns there is no assurance the conditions will be met or the merger completed.
The escrow structure means the $700 million reaches DSG only if the stockholder vote passes and the merger closes.
