(Bloomberg) — Johnson & Johnson tapped the bond market for $7.5 billion to help fund its acquisition of Momenta Pharmaceuticals Inc., adding to a week that’s seen a resurgence in financing for takeovers.
The drugmaker was the latest in a string of companies to seek funding for mergers and acquisitions, bringing even more supply to a high-grade market that’s set a new record for the month of August. Intercontinental Exchange Inc., Roper Technologies Inc. and a unit of KKR & Co. all brought bond sales in recent days to help fund M&A.
J&J sold the debt in six parts with the longest portion, a 40-year security, yielding 110 basis points over Treasuries, after initially discussing around 125 basis points, according to a person with knowledge of the matter, who asked not to be identified as the details are private.
The New Brunswick, New Jersey-based company is looking to fund a takeover worth $6.5 billion — the pharmaceutical industry’s biggest this year — which will build out its repertoire of autoimmune-disease drugs. The Momenta deal is the latest sign drug companies are looking for ways to bulk up even as the coronavirus pandemic upends other businesses.
The bond sale represents J&J’s first time in the market in almost three years. As one of the last companies standing with a perfect AAA credit rating, the offering rivaled record-low yields set in recent transactions from Google parent Alphabet Inc. and Visa Inc.
While J&J should be able to pay down the debt, higher leverage will hurt its flexibility to handle potential talc and opioid-related litigation fees, according to Moody’s Investors Service. S&P Global Ratings said that J&J’s adjusted debt to a measure of earnings is already at a 15-year high.
JPMorgan Chase & Co. and Bank of America Corp. managed the bond sale, the person said.
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.