Elan to fund buying spree with USD800m high-yield bond

Mon May 20, 2013 5:45am EDT

LONDON, May 20 (IFR) - Irish drugmaker Elan will stage a return to the bond market this week with a USD800m high-yield offering that will fund share purchases, capital expenditure and acquisitions.

The company, rated Ba3/B+, announced Morgan Stanley as sole bookrunner on the eight-year senior note, callable after three years, coinciding with an announcement on Monday that it was buying two private drug firms and buying back more shares.

Elan, which currently has no bonds outstanding, rejected a USD5.7bn bid from US investment firm Royalty Pharma and is trying to convince shareholders to do the same by returning cash and going on a spending spree that began with a USD1bn deal last week with US company Theravance.

Elan made its second and third purchases on Monday, buying Austrian rare drug specialist AOP Orphan for EUR263.5m (USD337m) and paying USD40m for a 48% stake in Dubai-based sales and marketing firm Newbridge Pharmaceuticals.

It will still have USD1.2bn of cash left to spend if shareholders approve the acquisitions, and plans to announce more deals in the second half of the year, chief executive Kelly Martin said on Monday.

The company said last week it was planning to raise a bond to fund the 21% stake of the royalties that Theravance receives from GlaxoSmithKline for its respiratory drugs. The deal, like the issuer's previous forays in the bond market, was expected to be in dollars.

Morgan Stanley will begin a roadshow for the bond on Monday and is expected to price it later this week after the presentations end on Wednesday.

"We don't have a pre-prescribed capital structure. We are not afraid of debt, we are not afraid of not having debt, but what we won't do is use debt to fund long-term pipeline assets," Martin said on an investor conference call last month.

The share buyback and package of deals, including last week's Theravance deal, must be approved at a special shareholder meeting on June 17.

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