Pfizer sells $31 billion in bonds in the fourth largest deal ever

(Bloomberg) — Pfizer Inc sold $31 billion in debt in the fourth-largest US bond sale ever, according to a person familiar with the matter.

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The pharmaceutical giant has garnered more than $85 billion in orders for the eight-part investment deal, which will fund its purchase of Seagen Inc. Separate multi-billion dollar debt-financed acquisition by Amgen Inc.

The sale of Pfizer’s bonds, the first since 2021, is the largest debt financing for a merger or acquisition this year, and comes amid a rush by companies to tap capital markets ahead of a potential jump in borrowing costs stemming from a confrontation with the U.S. debt ceiling. The longer part of the deal, the 40-year note, yielded 1.6 percentage points on the Treasuries, 1.8 percentage points lower than previous discussions, said the person, who asked not to be identified as a private deal.

Nicholas Elfner, co-head of research at Breckinridge Capital Advisors, said the mega investment grade deal is “a good test of the market in terms of measuring demand-side strength.” With quality issuers in defensive sectors, he said, there is usually “strong execution, particularly in a more volatile market environment.”

At $31 billion, the deal exceeded the amount sold by AT&T Inc. and Discovery Inc. in 2022 to help pay for their portfolio of media businesses, as well as show AbbVie Inc. for the 2019 acquisition of Allergan Plc and Bloomberg- compiled data show.

Pfizer’s massive bond sale comes as the Federal Trade Commission sued to block Amgen’s $27.8 billion deal to buy Horizon Therapeutics Plc Tuesday, arguing that the tie-up would stifle competition to develop treatments for serious illnesses, Bloomberg reported.

Amgen borrowed $24 billion to help fund the deal and may need to redeem these notes if the deal is blocked. Pfizer’s acquisition of Seagen surpasses Amgen as the largest acquisition 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 that it could make the Pfizer-Seagen deal “more difficult for the FTC.”

Carol Levinson, director of research at Gimme Credit, said some market participants believe the deal will be well received no matter what, given the company’s history when dealing with debt after the acquisition. And although the company has not yet made promises to repay the debt in a certain time, it added, “The term of financing means making quick payments in the early years.”

“Here we have a high-quality, non-cyclical credit on a balance sheet that can absorb a $43 billion acquisition without material damage even without drawing on the $20 billion in cash and investments on hand at the end of the first quarter or selling its stake in Haleon,” Levinson said.

The so-called special mandatory redemption language in the Pfizer deal — which determines whether or not to buy back the bonds if the deal doesn’t go through — was changed on Tuesday.

Pfizer representatives directed Bloomberg to the current public comments and have nothing else to add.

Pfizer began marketing the deal to investors on Monday. The sale was handled by Bank of America Corp. and Citigroup Inc. and Goldman Sachs Group Inc. and JPMorgan Chase & Co. Goldman Sachs, JPMorgan and Citigroup declined to comment, while Bank of America did not immediately respond to a request for comment.

The New York-based company agreed in March to buy Seagen for $229 per share in cash, bringing the total value of the venture to about $43 billion. The acquisition is expected to close later this year or early 2024.

— With assistance from Nina Trentman, Boris Corby, Alan Lopez, and Diana Moustack.

(Updates to reflect transaction pricing)

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