Aetna Sells $13 Billion of Bonds to Back Humana Purchase
June 02 2016 - 6:37PM
Dow Jones News
By Sam Goldfarb and Liz Hoffman
Aetna Inc. sold $13 billion of new bonds Thursday to fund its
$34 billion acquisition of Humana Inc., a move investors took as a
sign that the deal is on track with antitrust regulators.
Split among eight tranches, the offering is the third-largest
bond deal of the year, behind Anheuser-Busch InBev NV's $46 billion
issuance in January and Dell Inc.'s $20 billion placement last
month.
Shares of Aetna and Humana both rose, narrowing the discount at
which Humana trades to the cash-and-stock offer price. That gap,
around 17% at Thursday's close, is the smallest it has been since
early April.
Closing the acquisition is still not guaranteed. A number of
would-be acquirers have locked in financing for deals that
ultimately failed on antitrust grounds and have been stuck paying
fees for acquisitions that never happened.
Halliburton Co. issued $7.5 billion in bonds last fall for its
acquisition of Baker Hughes Inc., which regulators scuttled earlier
this year. It must now redeem at least $2.5 billion of that at a
premium, plus interest. Staples Inc. paid at least $94 million in
fees to raise a term loan backing its failed takeover of Office
Depot Inc., according to a March filing.
Aetna reiterated Thursday that it expects to complete the deal,
which is under regulatory review, later this year. It is facing
intense scrutiny from regulators partly because the plan comes
alongside another proposed merger, that of Anthem Inc. and Cigna
Corp., that would winnow the top five health insurers to three.
The Wall Street Journal recently reported concerns inside Anthem
and Cigna that their deal is losing ground to Aetna and Humana deal
in the regulatory review process.
Among the Aetna bonds issued Thursday was a $2.8 billion,
10-year note, priced at 1.45 percentage points above Treasurys, a
person familiar with the matter said. That resulted in a yield of
around 3.24%, a small premium to the roughly 3.1% yield of Aetna's
existing bonds due 2024 when they traded Wednesday, according to
MarketAxess.
Bond issuances of $10 billion or more have become more common of
late, as companies take advantage of low interest rates and strong
demand from a global pool of investors. Both Apple Inc. and Exxon
Mobil Corp. also topped that threshold this year, issuing $12
billion apiece in February.
Citigroup Inc. and UBS Group AG were joint active bookrunners on
the Aetna bond deal.
Write to Sam Goldfarb at sam.goldfarb@wsj.com and Liz Hoffman at
liz.hoffman@wsj.com
(END) Dow Jones Newswires
June 02, 2016 19:22 ET (23:22 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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