The drugmaker intends to issue $1.25 billion of 30-year notes that may pay 102 basis points more than similar-maturity Treasuries and $1.75 billion of 10-year bonds with a spread of 87 basis points, according to a person familiar with the offering who asked not to be identified, citing lack of authorization to speak publicly.
The deal also includes $1 billion portions of five-year debt yielding an extra 52 basis points, similar-maturity notes paying 36 basis points more than the London interbank offered rate, three-year securities with a spread of 32 basis points more than Treasuries and $500 million of similar-maturity floating debt paying 19 more than Libor, the person said.
A “substantial portion” of the proceeds will fund share repurchases that will reach about $7.5 billion over the next 12 months, Whitehouse Station, New Jersey-based Merck said today in a regulatory filing.
The company’s $1 billion of 2.4 percent bonds due September 2022 traded May 13 at 98.63 cents on the dollar to yield 2.57 percent, or 64.4 basis points more than similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
“Merck’s credit ratios will steadily weaken but remain solid as the company executes a $15 billion share repurchase program over the next several years,” Michael Levesque, an analyst at Moody’s, wrote yesterday in a report that lowered Merck’s debt that isn’t guaranteed by its Merck Sharp & Dohme unit to A2 from A1.
Shares of Merck, which has a market value of more than $140 billion, traded at $46.89 at 1:53 p.m. in New York. Libor (US0003M), the rate at which banks say they can borrow in dollars from each other, was set at 0.274 percent today.
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