In what it called the largest corporate euro hybrid bond transaction worldwide, Bayer has issued two hybrid bonds with a total volume of €3.25 billion as the first step in refinancing the $14.2 billion bridge loan it secured to nail down its acquisition of the consumer care business of US drugmaker Merck & Co.

The bonds are structured to receive equity credit of 50% from the relevant rating agencies to preserve Bayer's single-A credit rating remains intact. The German group said investor demand for the bonds was "exceptionally strong," and the order book was oversubscribed more than three times.

The first tranche of €1.75 billion has a maturity of 61 years and a coupon of 3.0%. Bayer has an early redemption option for the first time in 2020.

The second tranche of €1.5 billion has a maturity of 60 years and a coupon of 3.75%. On this tranche, Bayer has an early redemption option for the first time in 2024.

From 2020 and 2024 respectively, the coupons will be reset at regular intervals. The bonds are subordinated to all of Bayer's other financial liabilities and rank pari-passu to its existing hybrid of €1.3 billion issued in 2005.

"This hybrid transaction represents an important step in the financing of the acquisition of Merck & Co's consumer care business and is proof of our commitment to a conservative financial policy," said the Bayer CFO Werner Baumann. "Our continuously strong backing in the capital markets is the optimal basis for further financing measures."

Barclays, BNP Paribas, Citigroup and HSBC were mandated as active book runners n the transaction.