Market Overview

Johnson & Johnson Borrows $7.5B To Fund Its Purchase Of Momenta

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Johnson & Johnson Borrows $7.5B To Fund Its Purchase Of Momenta

Johnson & Johnson (NYSE: JNJ) is borrowing $7.5 billion in bonds to help fund its purchase of Momenta Pharmaceuticals, Inc (NASDAQ: MNTA) as a series of companies tap the debt market to finance merger and acquisitions, Bloomberg reported Thursday.

What Happened

The multinational drugmaker sold debt in six parts to fund its purchase of Momenta, with the longest — a 40-year note — yielding 110 basis points over Treasuries. The paper was earlier discussed at 125 basis points, a person familiar with the matter told Bloomberg.

Other companies that have raised funds through bond issues to fund M&A activities in recent days include Intercontinental Exchange Inc (NYSE: ICE), Roper Technologies Inc (NYSE: ROP), and a KKR & Co Inc (NYSE: KKR) unit.

The New Jersey-based company enjoys a pristine AAA credit rating and is raising capital through the debt markets for the first time in three years. 

The offering achieved record-low yields, also observed in the recent offering of Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG).

The managers for the issue are said to be Bank of America Corp (NYSE: BAC) and JPMorgan Chase & Co (NYSE: JPM), according to unnamed sources of Bloomberg.

Why It Matters

Johnson & Johnson announced this week it would acquire Momenta in a deal valued at $6.5 billion by the second half of 2020. 

The higher leverage incurred to fund the purchase is expected to affect the pharmaceutical giant’s ability to pay for liabilities arising from litigation related to the talc and opioid cases, according to Moody’s Investors Service.

S&P Global Ratings reportedly said that the company’s adjusted debt to a measure of earnings is at a 15-year high.

Price Action 

Johnson & Johnson shares closed nearly 0.7% higher at $151.42 on Thursday and gained another 0.2% in the after-hours session.

 

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