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Danaher Corp. (DHR) was in the market Monday with a four-part debt offering split among three-, five- and 10-year notes, according to a person familiar with the sale. The diversified manufacturing and technology company added a two-year floating-rate note tranche after the initial sale announcement.
The $1.8 billion offering--Danaher's largest deal on record, according to data provider Dealogic--comprises $300 million in two-year floating-rate notes, $400 million in three-year notes, $500 million in five-year notes and $600 million in 10-year notes.
Proceeds from the bonds, along with capital raised from a pending public stock offering, will help the company fund its acquisition of Beckman Coulter Inc. (BEC), a maker of biomedical testing and diagnostic devices.
Any remaining proceeds will be used for unspecified general corporate purposes, the company said in a filing with the Securities and Exchange Commission.
The three-year piece was launched at 65 basis points over Treasurys, the five-year piece at a spread of 80 basis points and the 10-year piece at a spread of 95 basis points, the person familiar said. The floating-rate notes are expected to be sold with a risk premium of 25 basis points over the three-month London interbank offered rate, or Libor. All four tranches were launched at levels narrower than preliminary pricing guidance, suggesting high demand.
Danaher, based in Washington, got the necessary approvals for the acquisition last week from the European Commission, its last regulatory hurdle before it can close on the Beckman Coulter shares at $83.50 a piece.
The company said it expects Moody's Investors Service to rate the notes A2, and Standard & Poor's to rate them A+. Danaher's outlook from Moody's is negative because the acquisition is up to three times larger than earlier transactions and will double the company's funded transaction sheet, said Ed Wiest, a vice president and senior analyst at Moody's. Danaher's initial credit metrics, such as leverage and interest coverage ratios, are weak for an A2 rating, but Wiest said the company has a strong track record of generating free cash flow to reduce indebtedness.
Bank of America Merrill Lynch and Deutsche Bank Securities are leading the sale, backed by BNP Paribas, HSBC and Wells Fargo Securities.
There is a special mandatory redemption, meaning that if Danaher doesn't complete the Beckman Coulter acquisition before Dec. 31, or if the merger agreement is terminated before then, the issuer will be required to redeem all the notes at 101% of their face value, plus accrued and unpaid interest. Additionally, in the event of a change of control, such as a takeover, the company will pay bondholders 101% of the bonds' face value.
Danaher last came to market in February 2009 for $750 million in 5.4%, 10-year bonds, according to Dealogic. Those notes due 2019 are trading with a risk premium of 0.55 percentage point over 10-year Treasurys, according to the person familiar with the sale.
The new 10-year notes priced with a 3.9% nominal interest rate or a risk premium of 0.95 percentage point over the 10-yr Treasury. That's about 0.14 percentage point cheaper from the borrower's perspective than where the 2019 bonds are trading on a secondary basis when adjusting for maturities.
The company's stock offering, scheduled to be completed Tuesday, involves the sale of 17.5 million common shares priced at $51.75 a piece for an estimated $877.4 million. On top of that, the underwriters have a 30-day option to buy up to 1.75 million of additional shares. Citigroup, Morgan Stanley & Co., Barclays Capital and UBS Securities are leading the equity offering.
The acquisition of Beckman Coulter is expected to close in June. A Danaher representative didn't immediately return a request for comment.
-By Nicole Hong and Katy Burne, Dow Jones Newswires; 212-416-3760; firstname.lastname@example.org