(Bloomberg) — Pfizer Inc. bought $31 billion of debt within the fourth-largest US bond sale ever, in line with an individual with data of the matter.
Most Learn from Bloomberg
The pharmaceutical big raked in over $85 billion in orders for the eight half investment-grade deal, which is able to finance its buy of Seagen Inc. Pfizer and its bankers had been compelled to switch phrases of the deal on the fly Tuesday after the US sued to dam a separate multibillion-dollar debt-funded acquisition by Amgen Inc.
Pfizer’s bond sale, its first since 2021, is the most important debt financing for a merger or acquisition this yr, and comes amid a rush by firms to faucet capital markets forward of a possible leap in borrowing prices sparked by the US debt ceiling standoff. The longest portion of the deal, a 40-year bond, yielded 1.6 proportion level over Treasuries, decrease than earlier discussions for 1.8 proportion level, stated the individual, who requested to not be recognized because the transaction is personal.
A jumbo funding grade deal is “a very good check for the market by way of gauging the power of the demand facet,” stated Nicholas Elfner, co-head of analysis at Breckinridge Capital Advisors. With high-quality issuers in defensive sectors, there’s sometimes “strong execution, significantly in a extra risky market setting,” he stated.
At $31 billion, the deal surpasses the quantity bought by AT&T Inc. and Discovery Inc. in 2022 to assist pay for the mixture of their media companies, in addition to AbbVie Inc.’s 2019 providing for the acquisition of Allergan Plc, Bloomberg-compiled knowledge exhibits.
Pfizer’s mega bond sale comes because the Federal Commerce Fee sued to dam Amgen’s $27.8 billion deal to purchase Horizon Therapeutics Plc Tuesday, arguing the tie-up would stifle competitors for the event of therapies for severe sicknesses, Bloomberg reported.
Amgen borrowed $24 billion to assist fund the deal and would possibly have to redeem these notes if the deal will get blocked. Pfizer’s acquisition of Seagen bypasses Amgen’s as the most important buy to return to market this yr. Jefferies LLC analysts led by Akash Tewari stated in a analysis notice that the shortage of overlap weakens the FTC’s case, noting it might make the Pfizer-Seagen deal “a tougher pitch to the FTC.”
However some market individuals assume the deal might be effectively obtained it doesn’t matter what, given the corporate’s historical past when dealing with debt after an acquisition, stated Carol Levenson, director of analysis at Gimme Credit score. And though the corporate has not but made guarantees of paying down debt by a sure time, she added, “the tenor of the financing implies swift paydowns within the early years.”
“We’ve right here a top quality, noncyclical credit score with a stability sheet that may soak up a $43 billion acquisition with out materials injury even with out tapping its $20 billion of money and investments available on the finish of the primary quarter or promoting its Haleon share,” Levenson stated.
The so-called particular obligatory redemption language within the Pfizer deal — which determines whether or not the bonds might be repurchased or not if the deal doesn’t undergo — was modified Tuesday.
Representatives for Pfizer directed Bloomberg to current public feedback and had nothing additional so as to add.
Pfizer started advertising the deal to traders on Monday. Financial institution of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. managed the sale. Goldman Sachs, JPMorgan and Citigroup declined to remark, whereas BofA didn’t instantly reply to a request for remark.
The New York-based firm in March agreed to purchase Seagen for $229 per share in money, bringing the overall enterprise worth to about $43 billion. The acquisition is predicted to shut later this yr or in early 2024.
–With help from Nina Trentmann, Boris Korby, Allan Lopez and Dayana Mustak.
(Updates to mirror deal pricing)
Most Learn from Bloomberg Businessweek
©2023 Bloomberg L.P.