Amgen Kicks Off Jumbo Dollar Bond Deal to Finance Horizon Acquisition

Amgen Inc. sold a $24 billion investment-grade bond Wednesday to help fund its purchase of Horizon Therapeutics Plc.

(Bloomberg) — Amgen Inc. sold a $24 billion investment-grade bond Wednesday to help fund its purchase of Horizon Therapeutics Plc.

The pharmaceutical company raised notes in eight parts, said a person with knowledge of the deal. The longest portion of the bond, a 40-year note, yields two percentage points over Treasuries, said the person, who asked not to be identified as the deal is private, after initial discussions of around 2.3 percentage points. The Thousand Oaks, California-based company raked in $90 billion in orders for the deal before books closed, according to a person familiar. 

Proceeds from the deal will be used to repay the outstanding balance of a bridge loan the company used to help fund its acquisition of Horizon in December. Amgen originally took out a $28 billion bridge loan, which is a facility provided by banks and typically replaced with permanent financing in the bond market. The company then paid down part of the bridge loan with $4 billion worth of term loans, resulting in $24.5 billion that still needs funding. 

Amgen is among the companies seizing an opportunity to sell debt after Tuesday’s inflation reading of 0.5% for January, which was in line with market expectations. Investor demand for blue-chip debt has been strong this year as yields are high and credit spreads remain low. Highly rated companies have been quick to go to market in recent weeks after the Federal Reserve earlier this month slowed its tightening cycle with a quarter-point increase in interest rates. 

Wednesday’s sale marks the biggest bond raised in the investment-grade market since AT&T Inc. and Discovery Inc. secured $30 billion of funding for the combination of their media businesses in March.

Investors are looking to put cash to work, said CreditSights’ global head of credit strategy, Winnie Cisar. “The start of this year has given way to more constructive sentiment in the economy in general,” Cisar said. “All-in yield being so much higher than it has been for a long time is providing investors with a more comfortable environment than worrying about spreads.”

A representative for Amgen declined to comment.

Amgen’s purchase of Horizon marks the biggest acquisition in the company’s history and deepens its focus on treatments for autoimmune, inflammatory and rare diseases. Eric Axon, a senior analyst at CreditSights, said the company will likely be able to deleverage after the transaction has closed.

“Net leverage will go to mid 3x by our calculations and that needs to be taken seriously,” he said in a phone interview. “But, the underscoring here is that management has the willingness and ability to delever. And in context of price talk, the notes have a path for spread tightening on the strategic merit of the deal and on deleveraging. Management seemingly wants to retain high BBB type ratings.” 

Total debt stood at $39.64 billion at the end of the fourth quarter, up from $33.98 billion at the end of the prior-year period. 

(Updates to show deal has priced. A prior version of the story was corrected to reflect the size of the bridge loan.)

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