This year’s winner in the Bonds above £750m category was pharmaceuticals giant GSK. In a transaction that was well-aligned with the company’s M&A agenda, the treasury team secured an impressive $3.5bn transaction, with three tranches in tenors of three, five and 10 years. Adding to the challenge, all this was achieved less than a year after completing a $6bn transaction.
The object of the 2019 bond was to finance the company’s $5.1bn acquisition of Tesaro, an oncology-focused biopharmaceutical company, which was completed in January 2019. GSK used the proceeds of the issuance to repay most of the $5bn bridge loan that it had put in place for the acquisition, with the remainder of the bridge loan repaid with cash on hand.
Issued in March 2019, the bond was well received, with an order book that peaked in excess of $9bn, including 16 triple-digit orders. Consequently, GSK was able to tighten pricing by 15-20bps from initial price thoughts. While demand was fairly even across the three fixed-rate tranches, it was skewed towards the three-year tranche compared to a three-year floating rate note tranche that was initially included – which prompted GSK to drop the floating tranche and fully allocate $1.5bn to the fixed tranche.
GSK was able to move to the tight end of the guidance range in each case. The three- and five-year tranches priced 2bps through GSK’s secondary curve, while the 10-year tranche paid a minimal 2bps in new issue premium.
The judges were impressed by the treasury team’s forward-thinking approach to the deal. Instead of opting for straight maturities, the company set the bond’s maturity dates in June to avoid future refinancing periods during the company’s reporting period.
Also noteworthy was the fact that this was the second time in 10 months that GSK had accessed the US market in order to fund a major acquisition. The deal is just one achievement within an ongoing transformative period, which has also seen the company complete a $6bn transaction in May 2018, in order to fund the $13bn buyout of Novartis’s stake in the company’s healthcare joint venture.
After closing another consumer healthcare joint venture with Pfizer in August, GSK has also recently announced a plan to separate its consumer business from the GSK pharma and vaccines business within three years.
All in all, GSK’s bond was an impressive deal that ticked plenty of boxes, from attractive pricing to a forward-thinking approach to timings – all while the treasury team was also navigating a broader period of challenging transformation.
“This was great work. GSK has been very active over the past couple of years, driven by the M&A agenda – and this bond was a strong example of taking the right opportunity at the right time.”
Providers: Bank of America, Deutsche Bank Securities, Goldman Sachs, HSBC
Structure: A $3.5bn bond across three-, five- and 10-year tenors
This article was taken from the October/November 2020 issue of The Treasurer magazine.
