Outlook 2010: Drug companies, money managers lead 2009's notable deals

By Andrea Heisinger

New York, Dec. 31 - Pharmaceutical companies issued mega-deals in 2009 - mostly to finance acquisitions of rival drug makers - and provided the most notable bond deals of the year, sources said.

The bond issues were notable for their sheer size, but other deals were interesting for other reasons.

Two money managers were among those mentioned due to their coming back to the market. One split-rated homebuilder was also on the list as the market reopened for them after a rough 2008 and beginning of 2009.

Pharma's mega-deals

One deal that two syndicate sources mentioned was the upsized $16 billion sale in six tranches by Swiss drug maker Roche Holding AG.

The company sold the notes on Feb. 18, 2009 to partially fund the takeover of rival Genentech Inc. The size was doubled from a planned $8 billion and was one of the largest ever done in U.S. dollars. One of the largest deals of 2008, from GlaxoSmithKline plc, was used as the benchmark.

"That was the largest corporate done in recent memory," a source who worked on selling the deal said of Roche. "It's almost impossible to definitely say it's the largest ever. There may have been something 10 years ago, but we're looking at more recently."

Another source said that "it was definitely one of the biggest deals of the year, just for its size."

A second drug maker also priced a huge deal, exactly one month after the Roche sale, and a source who worked on the sale on March 18, 2009 said it was one of his most notable deals.

Pfizer Inc. priced $13.5 billion in five tranches, with "approaching $30 billion" on the books.

There were other similarities with the Roche offering - with the Pfizer proceeds going to the acquisition of rival pharma name Wyeth, making it the world's largest drug company.

Both sales went overnight due to investor demand and the logistics of having so many bookrunners on such massive sales.

"They showed the market was still open to fund M&A," a syndicate source said of Roche and Pfizer.

Units of Novartis AG also jumped into the market on Feb. 4, 2009 to sell $5 billion in two tranches. There was about $16 billion on the books, and it was the company's first dollar-denominated bond, which increased demand, a source who worked on the offering said.

"Their only outstanding [non-dollar-denominated] bonds were all small," the source said. "It was a big deal because of that."

Money managers return

There were other notable deals away from the drug makers. Money management companies also showed they could get bonds priced in the investment-grade market.

Blackstone Holdings Finance Co. LLC priced $600 million on Aug. 13, and while it was not a massive sale, it was notable for other reasons.

"It was their first non-Euro bond," a syndicate source said.

The source also name-checked BlackRock, Inc.'s sale of $2.5 billion in bonds on Dec. 7, grouping it with Blackstone in importance.

"It showed that money managers are coming back to the market and were able to get things done," the source said.

Blackstone was heavily oversubscribed, with more than $4 billion on the books.

"It was good," a market source said. "We were able to tighten it down."

Market reopens to homebuilders

A syndicate source at Citigroup cited bond offerings from the homebuilder sector as notable from 2009.

"Citi led the homebuilders back to the market," he said.

Many of the deals were in the high-yield market, but split-rated deals from Toll Brothers Inc. were also priced. The company sold $400 million in bonds on April 13, 2009 and $250 million on Sept. 15.

"It showed they were able to raise money," the source said. "We reopened the market to get it done."

"It showed that money managers are coming back to the market and were able to get things done." - A syndicate source said of the Blackstone and BlackRock bond issues

"They showed the market was still open to fund M&A." - A syndicate source of Roche and Pfizer

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