Maersk Dollar Bond Sale Signals Acquisitions Are Getting Closer

  • Maersk issues new debt without needing the cash, SEB says
  • Analysts say Maersk may buy Dong Energy's oil and gas unit

A.P. Moeller-Maersk’s decision to issue $1 billion in new bonds this week has fueled speculation that Denmark’s biggest company is planning a large acquisition.

Maersk is “not in any way in need of cash” for its daily operations, Øystein Bogfjellmo, a credit analyst at SEB in Oslo, said in an interview. The bond sale is probably a way of diversify funding for a company that’s looking for oil and gas acquisition targets in the North Sea, he said.

Maersk’s oil unit has struggled with declining production from maturing fields. The drop in energy prices has made takeovers a better way of building reserves than exploring, the company has said.

“They have for the past year been communicating very clearly that they are looking for non-organic growth,” Bogfjellmo said. “Maersk have a very strong balance sheet and roughly $4 billion in cash. However, despite the strong balance sheet potential, M&A is likely to be financed through a combination of cash and debt.”

Maersk said on Monday it sold a $500 million bond due 2020 at a 2.875 percent coupon and a $500 million note due 2025 with a coupon of 3.875 percent. That compares with coupons of 2.55 percent over five years and 3.75 percent over 10 years in dollar bond sales conducted by Maersk one year ago.

The bonds “looked somewhat expensive for Maersk at first glance according to its other outstanding bonds in the market,” Bogfjellmo said. “But when taking into account the new issue premium and the indicative curve for dollar BBB+ rated bonds for European companies, it looks more fair and as expected.”

Analysts, including Jacob Pedersen at Sydbank and Jens H. Thomsen at Jyske Bank, have said that Maersk would be an obvious buyer for the exploration and production unit of Dong Energy, which may be up for sale. The division would have a value in the $3.6 billion to $8 billion range, according to a Bloomberg Intelligence estimate.

A Maersk spokesman declined to comment on whether Maersk is interested in the unit. In August, Maersk Chief Executive Officer Nils Smedegaard Andersen said he would consider the division if it comes up for sale.

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