Bayer Places €4 Billion for Monsanto Loan
Bayer has completed the placement of €4 billion in mandatory convertible notes with institutional investors, excluding the pre-emptive rights of the shareholders of Bayer AG. The issue, which is the largest ever mandatory convertible bond for a European issuer and the largest European equity capital markets deal in 2016, represents the first component of the already announced equity capital measures of around $19 billion in connection with the planned acquisition of Monsanto.
Net proceeds of the offering are intended for the early replacement of a portion of the undrawn commitments under the German group’s syndicated term loan facility agreement. Bayer’s share price eased off slightly on the news after rising nearly 7% earlier in reaction to the election of Donald Trump as US president.
Analysts for Fitch Ratings said they believe Bayer’s timing for placing the instrument was driven by the strong equity performance of pharma and healthcare shares following the US election, calming investors’ concerns. The market worried that a Democratic administration would have initiated price controls on drugs and possibly derailed the purchase.
"The strong interest in the mandatory convertible notes confirms the capital market’s confidence in Bayer,” chief financial officer, Johannes Dietsch. The transaction was “multiple times oversubscribed,” which he said demonstrates its attractiveness to investors.
The notes, issued at par with a coupon of 5.625 % annually in the principal amount of €100,000 each, will be issued by Bayer Capital Corporation BV in the Netherlands under the subordinated guarantee of Bayer AG. At maturity, outstanding notes will be automatically converted into ordinary shares of the company.
Minimum conversion price for the notes has been set at €90 and the maximum conversion price at €108, representing a maximum conversion premium of 20%. The papers are due to mature on Nov. 22, 2019. BofA Merrill Lynch, Credit Suisse, Goldman Sachs and J.P. Morgan are acting as Joint Global Coordinators and Joint Bookrunners, Citigroup and HSBC are acting as Co-Bookrunners.
