5 Banks Were Not Enough For PFE’s Aquisition of Wyeth

PFE issues notes for $13.5 billion

March 17 (Bloomberg) — Pfizer Inc., the world’s biggest drugmaker, is planning a five-part, $13.5 billion sale of notes to help finance its purchase of Wyeth in the biggest non- financial offering since Roche Holding AG’s sale in February.

Bankers for New York-based Pfizer are marketing the bonds at yields of 1.95 percentage points to 3.45 percentage points more than benchmarks, according to a person familiar with the offering who declined to be identified because terms aren’t set. Roche paid yields of 2 percentage points to 3.65 percentage points last month for debentures of similar maturity.

Pharmaceutical companies are tapping the debt markets to finance mergers and acquisitions, taking advantage of investor appetite for alternatives to bonds from financial companies. Drugmakers have offered about $40.5 billion of bonds this year, compared with $13 billion in all of 2008, according to data compiled by Bloomberg.

“The market still has faith in the pharmaceutical sector as a whole,” said Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia. “The opportunities tend to be in the lower risk U.S.-dollar type issuers, and Pfizer of course fits the bill pretty well.”

Roche on Feb. 18 sold $16 billion of bonds to finance its takeover of Genentech Inc. in the second-largest corporate bond offering in a single day, according to data compiled by Bloomberg.

France Telecom

France Telecom SA raised $16.4 billion in March 2001 in the largest corporate bond offering without a government guarantee, Bloomberg data show. The sale consisted of bonds denominated in dollars, euros and pounds.

Pfizer’s $1.25 billion of two-year, floating-rate notes may pay 195 basis points more than the three-month London interbank offered rate, the person said. Libor, a borrowing benchmark, is currently 1.3 percent.

The $3.5 billion of three-year notes may price to yield 305 basis points more than similar-maturity U.S. Treasuries; $3 billion of six-year notes may pay a 340 basis-point spread; $3.25 billion of 10-year notes may pay 325 basis points; and $2.5 billion of 30-year bonds may pay 345 basis points, the person said. A basis point is 0.01 percentage point.

Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of America Merrill Lynch, Citigroup Inc. and Barclays Plc are managing the sale, the person said.

AAA Rating

Standard & Poor’s ranked the proposed Pfizer securities AAA, according to a statement released yesterday by the New York-based ratings company. The ranking will likely be lowered to AA, two levels lower, after the acquisition of Wyeth, S&P said.

“The additional borrowings needed to fund the acquisition weaken credit measures from the essentially unleveraged position of the past few years,” S&P analyst David Lugg in New York said in the statement.

While adding Madison, New Jersey-based Wyeth’s products to Pfizer’s portfolio “would improve the company’s overall diversification,” it “would only modestly reduce the proportion of revenues exposed to generic competition through 2011,” S&P said.