J&J borrows US$7.5b for Momenta in latest M&A bond sale

[NEW BRUNSWICK] Johnson & Johnson tapped the bond market for US$7.5 billion to help fund its acquisition of Momenta Pharmaceuticals, 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 (M&A), bringing even more supply to a high-grade market that's set a new record for the month of August. Intercontinental Exchange, Roper Technologies 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 US$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 rivalled record-low yields set in recent transactions from Google parent Alphabet Inc and Visa.

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 managed the bond sale, the person said.

BLOOMBERG