(Bloomberg) — Pfizer Inc. raked in over $85 billion in orders for its investment-grade jumbo bond sale on Tuesday that’s lining up to be one of the biggest ever, according to a person with knowledge of the matter.
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The pharmaceutical giant is selling debt in eight parts, according to a person familiar with the matter, to help fund its purchase of Seagen Inc. The longest portion of the deal, a 40-year bond, is expected to yield 1.6 percentage point over Treasuries, lower than earlier discussions for 1.8 percentage point, said the person, who asked not to be identified as the transaction is private.
Pfizer’s latest bond offering, its first since 2021, is the largest debt financing for a merger or acquisition so far this year, and among the biggest corporate bond offerings on record. The sale is targeting around $30 billion, according to the person familiar. When the acquisition was announced in March, Pfizer said it expected to finance the purchase with $31 billion of new, long-term debt, and the remainder from a combination of short-term financing and existing cash.
A jumbo investment grade deal is “a good test for the market in terms of gauging the strength of the demand side,” said Nicholas Elfner, co-head of research at Breckinridge Capital Advisors. With high-quality issuers in defensive sectors, there’s typically “solid execution, particularly in a more volatile market environment,” he said.
At $30 billion, the deal would rank alongside a few other sales as the fourth-largest corporate bond ever, according to data compiled by Bloomberg. It would match the amount sold by AT&T Inc. and Discovery Inc. in 2022 to help pay for the combination of their media businesses, as well as AbbVie Inc.’s 2019 offering for the acquisition of Allergan Plc, Bloomberg-compiled data shows.
Pfizer’s mega bond sale comes as the Federal Trade Commission sued to block Amgen Inc.’s $27.8 billion deal to buy Horizon Therapeutics Plc Tuesday, arguing the tie-up would stifle competition for the development of treatments for serious illnesses, Bloomberg reported.
Amgen borrowed $24 billion to help fund its $27.8 billion deal and might need to redeem those notes if the deal gets blocked. Pfizer’s acquisition of Seagen bypasses Amgen’s as the largest purchase to come to market this year. Jefferies LLC analysts led by Akash Tewari said in a research note that the lack of overlap weakens the FTC’s case, noting it could make the Pfizer-Seagen deal “a more difficult pitch to the FTC.”
But some market participants think the deal will be well received no matter what, given the company’s history when handling debt after an acquisition, said Carol Levenson, director of research at Gimme Credit. And although the company has not yet made promises of paying down debt by a certain time, she added, “the tenor of the financing implies swift paydowns in the early years.”
“We have here a high quality, noncyclical credit with a balance sheet that can absorb a $43 billion acquisition without material damage even without tapping its $20 billion of cash and investments on hand at the end of the first quarter or selling its Haleon share,” Levenson said.
The so-called special mandatory redemption language in the Pfizer deal — which determines whether the bonds will be repurchased or not if the deal doesn’t go through — was changed Tuesday.
Representatives for Pfizer directed Bloomberg to existing public comments and had nothing further to add.
Pfizer began marketing the deal to investors on Monday. Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading the sale. Goldman Sachs and JPMorgan declined to comment, while the other banks didn’t immediately respond to a request for comment.
The New York-based company in March agreed to buy Seagen for $229 per share in cash, bringing the total enterprise value to about $43 billion. The acquisition is expected to close later this year or in early 2024.
–With assistance from Allan Lopez, Dayana Mustak, Andrew Kostic and Nina Trentmann.
(Updates to reflect book orders.)
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