Medtronic ($MDT) has sold $17 billion in bonds to fund its $43 billion acquisition of Covidien ($COV) that's still expected to close early next year. The medical device giant had been expecting to fund the deal mostly with ex-U.S. cash, but opted instead for debt in order to avoid potential issues with U.S. regulators seeking to crack down on tax inversion deals.
In September, the U.S. Department of the Treasury issued changes to tax rules designed to deter inversion deals, banning the financing technique Medtronic had planned previously to use to employ foreign cash to fund the deal.
Medtronic's debt pricing is the largest for any company this year, according to The Wall Street Journal. And Bloomberg notes that the sale pushes the U.S. corporate bond market to a new high, surpassing $1.5 trillion already this year.
The senior notes are in seven tranches that are slated to close on Dec. 10. These include $4 billion at 4.625% due in 2045; $2.5 billion at 4.375% due in 2035; $4 billion at 3.5% due in 2025; $2.5 billion at 3.15% due in 2022; $2.5 billion at 2.5% due in 2020; $1 billion at 1.5% due in 2018; and $500 million in floating rate notes due in 2020.
The deal is moving along according to plan thus far. Both the U.S. Federal Trade Commission and EU regulators have signed off on the deal after Covidien agreed to sell its clinical-stage Stellarex drug coated angioplasty balloon for peripheral artery disease to Spectranetics ($SPNC) for $30 million in order to avoid potential antitrust issues.
Up next, shareholders at each company will meet separately on Jan. 6 to vote on the acquisition.
Investors seemed to approve of the financing deal, pushing each company up a little less than 1% in early trading on Dec. 2 after news of it broke.
- here is the release on the bond deal
- and here is coverage from the WSJ and Bloomberg