White Cap Reported to Be Fund-Raising

White Cap Industries Inc., which sells tools to building contractors in the western U.S., is preparing to raise $220 million from a loan and junk bond sale, said people familiar with the company’s plans.

The Costa Mesa-based company is to sell $120 million of junk notes, probably with a 10-year maturity. Donaldson, Lufkin & Jenrette Securities is arranging the sale.

Lenders are expected to meet Friday in California to consider the $100-million senior secured loan, bankers said.

The company could not be reached for comment.

White Cap said in July that it would be acquired by its management and a group led by Leonard Green & Partners LP, a Los Angeles-based private merchant banker, for $240 million. A shareholder vote on the plan is scheduled for Jan. 21.

The management and investment group agreed to pay $16.50 a share to purchase the company and take it private. The group includes founder and Chief Executive Greg Grosch, who will remain CEO.

White Cap’s stock was unchanged Monday, closing at $15 a share on the Nasdaq Stock Market.

Proceeds from the bank loan will be used for day-to-day spending and future acquisitions. The note proceeds are expected to repay a $120-million bridge loan, also arranged by Donaldson, Lufkin.

White Cap, founded in 1976, went public in October 1997, moving up to $24.13 in its first day of trading from an initial offering price of $18 a share.