sanofi-aventis issues $7 billion worth of notes in debt sale

The only thing bigger than sanofi-aventis’ February purchase of Genzyme might be its recent debt sale.

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PARIS, France—The only thing bigger thansanofi-aventis' February purchase of Genzyme might be its recent debt sold $7 billion dollars worth of bonds today in order to fund itsacquisition, resulting in the largest debt offering since Feb. 4, 2010, whenWarren Buffett's Berkshire Hathaway Inc. sold $8 billion worth of debt.

sanofi issued one-, two- and three-year floating-rate notesin the sale, in addition to three-, five- and ten-year fixed-rate debt indollars, according to Bloomberg. The notes, according to the New York Times,mature from 2012 to 2021 and offer yields of 0.05 percent to four percent. Ifthe merger falls through, sanofi has said it will redeem the fixed rate notesas well as the floating rate notes in whole, at a price of 101 percent of theiroriginal amount.

The Genzyme deal will cost sanofi $74 per share, for a totalof $20.1 billion. Given such a large price tag, sanofi's debt sale is far fromsurprising. The deal also includes the potential for several milestonepayments, which consist of the following:

  • $1 per CVR if specified Cerezyme/Fabrazyme production levels are met in 2011
  • $1 per CVR upon final U.S. Food and Drug Adminisration (FDA) approval ofLemtrada for multiple sclerosis (MS) indication
  • $2 per CVR if net sales post-launch exceed an aggregate of $400 million withinspecified periods per territory
  • $3 per CVR if global net sales exceed $1.8 billion
  • $4 per CVR if global net sales exceed $2.3 billion $3 per CVR if global netsales exceed $2.8 billion

The deal is expected to close early in the second quarter of2011.

In a statement released by sanofi, Christopher Viehbacher, CEO of sanofi, says that the Genzyme agreement is "bothconsistent with our long-term strategy and creates significant long-term valuefor our shareholders," adding that it will "create a meaningful new growthplatform for sanofi-aventis while expanding our footprint in biotechnology." Henotes that they expect the deal to be accretive "from year one."

"The CVR structure, which served as an important valuebridge between our two companies, rewards both Genzyme and sanofi-aventisshareholders," says Viehbacher, "particularly if Lemtrada outperforms themarket's current expectations."

According to the company, part of the debt would be used for"the consideration payable in respect of the Genzyme acquisition and relatedcosts."

Bloomberg data show that the notes are expected to receive arating of A2 by Moody's Investors Service and AA- by Standard & Poor's.Joint book-running managers listed in the filing are Bank of America MerrillLynch, BNP Paribas SA, JPMorgan Chase & Co. and Societe Generale SA.

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