| LONDON, June 17
LONDON, June 17 U.S. medical device maker
Medtronic Inc is raising a $16.3 billion senior
unsecured bridge loan to finance its $42.9 billion acquisition
of Dublin-based Covidien Plc, banking sources said on
Bank of America Merrill Lynch (BoAML) is the sole initial
bookrunner of the deal, which is one of the bank's biggest loan
underwriting commitments to date, and is also acting as the sole
lead arranger and sole bookrunner, a senior banker close to the
Medtronic agreed to buy Dublin-based Covidien Plc and shift
its executive headquarters to Ireland on June 15 in the latest
move by U.S. firms to access lower corporate tax rates abroad.
Medtronic was not immediately available for comment.
BoAML's $16.3 billion sole underwriting is bigger than its
$15.25 billion share of the $61 billion bridge loan that backed
Verizon's acquisition of Verizon Wireless in September
2013, which was underwritten by four banks.
BoAML was also the sole underwriter of a $4 billion loan for
Swiss engineering group ABB's acquisition of US
electrical connectors manufacturer Thomas & Betts in March 2012.
LIQUID DEBT MARKETS
A sole underwriting of this size shows confidence in liquid
debt markets, which are giving rise to hopes of an M&A
renaissance, several bankers said.
"The credit markets are very strong at the moment, which
gives comfort around the debt capital markets takeout and the
bank market is strong and deep, which gives comfort on the
ability to syndicate the risk if needed," the senior banker
The deal has been structured in two tranches. One tranche is
a bridge loan to bond issues, which are expected to be issued
quickly, as is typical of acquisition bridge financings.
The second tranche is a bridge loan to cash which will allow
Metronic to source cash from different parts of its business,
the senior banker said. It is not yet clear if either tranche
will be syndicated.
Medtronic needed the full $16.3 billion underwriting to show
certainty of funds to the Irish stock exchange, the senior
The $42.9 billion cash-and-stock transaction values the
global healthcare technology and medical supplies provider at
$93.22 per share, representing a 29 percent premium to
Covidien's closing stock price of $60.70 on Friday, Medtronic
Medtronic will pay $35.19 in cash plus 0.956 shares of
Medtronic stock for each Covidien share. It will also assume
approximately $5 billion of Covidien debt, according to a
Moody's Investors Service affirmed Medtronic's A2 rating on
Monday, and put Covidien's Baa1 rating on review for upgrade.
Covidien shareholders will own approximately 30 percent of
the combined company, Medtronic said. The combination is
expected to result in at least $850 million of annual pre-tax
cost synergies by the end of fiscal year 2018.
Medtronic said it would keep its operational headquarters in
Minneapolis and pledged $10 billion in U.S. technology
investments over the next 10 years.
(Editing by Christopher Mangham)