2ndUPDATE:Pfizer Launches $13.5 Billion Bond Offering For Pricing Tuesday
17 Março 2009 - 2:01PM
Dow Jones News
Pharmaceutical giant Pfizer Inc. (PFE) launched its $13.5
billion, multi-part offering in the U.S. corporate bond market to
help fund its $68 billion acquisition of health-care company Wyeth
(WYE).
Pfizer's offering, rated triple-A by Standard & Poor's and
two notches lower by Moody's Investors Service, is scheduled to be
sold later Tuesday, according to a person familiar with the
deal.
Investors, who have been clamoring for investment-grade bonds
this year from companies with little debt and those that can best
weather economic downturns, swooped in for the Pfizer offering.
This helped narrow risk premiums on the bulk of the bonds from
original expectations.
Pfizer's deal is the latest in the sector to tap the U.S.
high-grade market for funds amid a flurry of merger and acquisition
activity in the pharmaceutical industry. Last month, Roche Holding
AG (RHHBY) raised a record $16.5 billion in the bond market to
finance its purchase of Genentech Inc. (DNA). Pfizer's offering is
the second-largest U.S.-dollar denominated deal, according to data
firm Dealogic.
"Investors are looking for investment-grade names even though we
have had good supply," said Daniel Sheppard, director at Deutsche
Bank Private Wealth Management. "There's still good appetite for
such paper."
With banks' lending capabilities limited, many companies are
choosing to tap hungry bond investors for funds to refinance
portions of temporary financing, known as bridge facilities, sooner
rather than later. Pfizer completed syndication of its bridge loan
only at the end of last week. In other cases, companies are
skipping the bridge loan altogether. Roche, for example, opted to
pre-fund its acquisition in the bond market first before securing
financing in the loan market.
And there's more big pharma debt on tap. Merck & Co. (MRK)
plans to sell bonds to partly refinance its $8.5 billion bridge
loan secured to buy rival Schering-Plough Corp. (SGP). Merck agreed
last week to buy Schering-Plough for $41.1 billion.
The consolidation in the pharmaceutical industry is being driven
by a wave of expirations of patents for blockbuster drugs, which
are exposing them to competition from cheaper generic versions. At
the same time, companies have hit numerous setbacks in recent years
finding successful new drugs to replace the lost revenue.
The rationale behind the combinations is to generate big cost
savings, beef up pipelines of experimental drugs, and to diversify
into areas outside of traditional prescription drugs, such as
consumer health products and biotechnology-style drugs. What
remains an open question is whether the latest round of
consolidation will avoid the same fate of some industry
mega-mergers earlier in this decade, which disrupted research
efforts and hurt stock price performance.
Pfizer's shares were recently down 17 cents, or 1.2%, at
$13.98.
Pfizer's two-year, floating-rate $1.25 billion notes launched at
195 basis points over the three-month London interbank offered
rate, or Libor, according to a source familiar with the deal.
The $3.5 billion, three-year, fixed-rate bonds launched at 305
basis points over Treasurys. Guidance was in the 310 basis points
over Treasurys area.
The $3 billion, six-year portion launched at 340 basis points
over Treasurys. Guidance was in the 345 basis points over Treasurys
area.
The $3.25 billion, 10-year part launched at 325 basis points
over Treasurys versus guidance of 330 basis points over Treasurys
area.
The $2.5 billion, 30-year tranche launched 345 basis points over
Treasurys versus guidance of 350 basis-point area.
Joint leads on the deal are Citigroup (C), Barclays (BCS), Bank
of America/Merrill Lynch (BAC) Goldman Sachs (GS) and JPMorgan
(JPM).
A Pfizer spokesperson wasn't immediately available to
comment.
Pfizer last sold a $1.45 billion deal on Jan. 27, 2004,
according to Dealogic.
-By Anusha Shrivastava and Romy Varghese, Dow Jones Newswires;
201-938-2371; anusha.shrivastava@dowjones.com
(Kate Haywood and Peter Loftus contributed to this report.)