NEW YORK, April 30 (Reuters) - Details have emerged on Watson Pharmaceutical’s $6.25 billion financing package backing its acquisition of Actavis Group following the company’s bank meeting today, sources told Thomson Reuters LPC.
Bank of America Merrill Lynch and Wells Fargo are leading the deal.
“We kicked off the process today,” said Paul Bisaro, president and CEO of Watson Pharmaceuticals. “We had a call with a number of banks and our timeline is consistent with what we said when we announced the acquisition. At that time we also said we’d be looking to upsize our revolver and do a public bond offering, which will take place in an August timeframe.”
Spokespeople for BAML and Wells Fargo did not return calls by press time.
The financing package consists of a $4.5 billion, 364-day bridge loan, a $1.5-2 billion, five-year term loan and $250 million of additional commitments to Watson’s existing $500 million revolving credit facility.
Pricing on the $4.5 billion, 364-day bridge loan is tied to ratings. It opens at 150bp over Libor, but increases by an additional 50bp every 90 days until maturity.
The bridge loan includes a 20bp ticking fee accruing from the date of commitment until termination of the loan. The bridge also offers a 50bp duration fee payable 90 days from closing of the bridge, increasing by 50bp at six months and nine months. The bridge commitment expires on February 28, 2013.
The company expects to take out the bridge loan by the third quarter of 2012 via a bond offering.
The $1.5 billion, five-year unsecured term loan, meanwhile, can be increased by $500 million to $2 billion if enough banks commit to the financing.
Pricing on the term loan opens at 150bp over Libor for expected ratings of BBB/Baa2.
The term loan also carries a 20bp ticking fee accruing from the earlier of the execution of the definitive documentation of the financing or July 1.
The company is offering upfront fees on the term loan of 25bp for commitments of $100 million, 22.5bp for commitments of $80 million or $50 million and 20bp for commitments of $25 million. The loan will amortize at 2.5 percent per quarter with the balance paid at maturity.
Additionally, pricing on the $250 million unsecured revolver opens at 125bp over Libor for drawn amounts and 15bp for undrawn amounts. This is in line with the existing revolver. The company is offering upfront fees of 20bp for new and incremental commitments to the revolver.
Commitments to the facilities are due May 14. The company is also expected to receive amendment consents from lenders about the revolver increase. The financing is expected to close at the end of May.
Watson said on April 25 it was acquiring Actavis for an upfront payment of 4.25 billion euros, and an additional 250 million euros in Watson common stock if it reaches specific milestones, for a total of 4.5 billion euros ($5.95 billion). As a result of this acquisition, Watson will become the third-largest global generics company with 2012 anticipated pro forma revenue of approximately $8 billion.
Closing of the acquisition is expected in the fourth quarter of 2012.