Aspen Pharmacare Holdings Ltd. (APN) is raising $2 billion of loans to finance acquisition deals it agreed to this year with companies including Merck & Co. (MRK) and Nestle SA (NESN), according to two people with knowledge of the matter.
The transaction consists of $730 million three- and five-year term loans, and two $288 million portions with the same maturities, said the people, who asked not to be identified because the terms are private. Some of the proceeds will also be used to refinance existing debt, the people said.
Aspen, South Africa’s largest drugmaker, agreed to a $1 billion deal last month to buy pharmaceutical assets from Whitehouse Station, New Jersey-based Merck to help the company grow in emerging markets, Chief Executive Officer Stephen Saad said. The acquisition follows offers for GlaxoSmithKline Plc (GSK)’s heart medicines and licenses to sell Nestle’s infant formula earlier in the year.
Bank of America Corp. and Standard Bank Group Ltd. are coordinating the facility, which is being marketed to other lenders, said the people. The three-year portions of the debt pay interest at 240 basis points, or 2.4 percentage points, more than the London interbank offered rate, and the longer-dated pieces, which are amortizing, have margins of 250 basis points more than Libor, the people said.
Aspen expects a cost of funding of 5 percent for new debt, Deputy CEO Gus Attridge said on a call with investors on June 27. Shauneen Beukes, a spokeswoman for Aspen, declined to comment on the details of the financing.
The company has outstanding debt of 10.4 billion rand ($1.1 billion), according to Aspen’s first-half earnings published on March 7. The Merck transaction is subject to the approval of antitrust authorities and the Financial Surveillance Department of the South African Reserve Bank.
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