Thermo Fisher active, little changed on call; Medtronic, Medicis trade; primary picks up

By Rebecca Melvin

New York, Feb. 28 - Thermo Fisher Scientific Inc.'s 3.25% convertibles due 2024 were actively traded but little changed Monday after the Waltham, Mass.-based scientific instruments company called the $329.23 million of those notes outstanding, market sources said.

Medtronic Inc. was also a top volume name on Monday, with the longer-dated Medtronic 1.625% convertibles due 2013 ending nearly flat, or at about 102.6, but under a little pressure during the session, while the shorter dated 1.5% convertibles due 2011 traded as low as 97.5 but moved back up to the unchanged market at 100 by the end of the day.

The Minneapolis-based medical device maker announced positive results of a published study of one of its heart valves.

Another mover in the health space was Medicis Pharmceutical Corp., which saw its convertibles and shares jump after the Scottsdale, Ariz.-based specialty pharmaceutical company reported better-than-expected earnings.

PDL BioPharma Co.'s 2.875% convertibles due 2015 were quiet, on the other hand, despite a 14% jump in its underlying shares in heavy volume ahead of the Incline Village, Nev.-based biotechnology company's earnings released after the market close and which missed expectations by a penny, a Connecticut-based sellside analyst said.

Ahead of the close, PDL announced that it entered into a definitive settlement agreement with Novartis, under which PDL agreed to dismiss its claims against Novartis in its action in Nevada court, which also includes Genentech, and F. Hoffmann-La Roche as defendants.

Novartis agreed to withdraw its opposition appeal in the European Patent Office challenging the validity of PDL's Queen patent in Europe.

Elsewhere, Salesforce.com was lower by 5 or more points outright as shares of the San Francisco-based cloud computing company got knocked down.

The Salesforce 0.75% convertibles were trading at 164.25 bid, 164.75 offered versus a share price of $130.00, a New York-based sellside trader said.

Overall, the convertibles secondary market was called quiet on the last day of February as market players marked their books and didn't get involved in much trading action, a New York-based sellside trader said.

After the market close, in the primary market, two deals emerged.

Health Care REIT Inc. launched a $625 million offering of convertible perpetual preferred shares at $50 per share that was talked to yield 6.5% to 7% with an initial conversion premium of 15% to 20%. Health Care REIT also plans to price $1.3 billion of common stock.

And Altra Holdings Inc. launched an offering of $75 million of 20-year convertibles that were talked to yield 2.75% to 3.25% with an initial conversion premium of 30% to 35%.

Issuance outpacing 2010

February issuance was about par with February 2010 with just over $1 billion in issuance priced in both months. For the year to date, convertibles new issuance is outpacing last year's rate by more than 20%.

Total U.S. convertibles issuance for the year to date was $3.51 billion in 14 deals, which is better compared to 2010's year to date period when $2.86 billion in new issuance in 10 deals priced.

For the year so far, J.P. Morgan Securities LLC has underwritten $1.27 billion of new issuance in six deals, accounting for 36% of total volume. Citigroup is the No. 2 underwriter with $633 million of new issuance in four deals, accounting for 18% of the total, according to data compiled by Prospect News.

Thermo active at parity

Thermo Fisher's 3.25% convertibles were trading at parity, which was 138.78 versus a share price of $55.79, and little changed from Friday, when the paper was seen at plus 0.125 point to plus 0.25 point.

"They were pretty active today, at parity," a New York-based sellside trader said of Thermo Fisher.

There wasn't much of a price change because investors expected that the paper would be called given that it was currently callable and the company has a good history of getting rid of their paper, the trader said.

"People knew they were going to get called; they were a good callable candidate," he said.

The notes will be redeemed on March 30 at par, plus accrued interest to the redemption date.

The notes are convertible at any time prior to March 29 at 24.8756 shares of common stock per $1,000 principal amount of the notes, or $40.20 per share. On Feb. 25, the company's stock closed at $55.56 per share.

Medtronic ends flat

Medtronic's 1.5% convertible due April 2011 dipped lower but ended flat at around par, while its 1.625% convertible due 2013 were also little changed at about 102.6.

Medtronic's common stock closed up a dime at $39.92, which was near its lows for the day after hitting a high note of $40.25.

The Minneapolis-based medical device maker announced that its Mosaic bioprosthetic heart valve demonstrated positive performance at 12 years in a study published online in The Journal of Thoracic and Cardiovascular Surgery.

The Mosaic valve was evaluated in patients who had aortic valve replacement and mitral valve replacement, and with 12 years of follow-up, the study revealed a freedom from structural valve deterioration of 93.3% of AVR patients 60 years and older and in 95.3% of MVR patients 70 years and older.

In addition, hemodynamic performance data showed stability up to 10 years, indicating durability of the Mosaic bioprosthesis over time.

In addition, Medicis 2.5% convertibles due 2032 added 6.575 points outright and were quoted on NASD Trace last at 114.875 versus a share price of $32.07. The Medicis convertibles were previously about 108.

Primary calendar builds

Health Care REIT plans to price $625 million convertible perpetual preferred shares at $50 per share after the market close Tuesday that were talked to yield 6.5% to 7% with an initial conversion premium of 15% to 20%, according to a market source.

Health Care REIT also plans to price $1.3 billion of common stock.

The convertibles, which have a greenshoe of $93.75 million, or 15%, are being sold via joint bookrunners UBS Investment Bank, Bank of America Merrill Lynch, Barclays Capital Inc., Deutsche Bank Securities Inc., JPMorgan and Wells Fargo Securities.

The perpetual shares are non-callable for seven years and then provisionally callable if shares exceed 130% of the conversion price. There are no puts.

Proceeds from both registered, off-the-shelf offerings are earmarked to finance a portion of the purchase price of its previously announced acquisition of Genesis HealthCare Corp. for $2.4 billion.

If that acquisition is not completed, the proceeds will be used for general corporate purposes, including investing in health care and senior housing properties and repaying borrowings under the company's unsecured line of credit and other outstanding debt.

The convertible preferreds have takeover protection.

Toledo, Ohio-based Health Care REIT is a self-administered equity real estate investment trust.

Altra plans to price $75 million of 20-year convertibles after the market close on Tuesday that were talked to yield 2.75% to 3.25% with an initial conversion premium of 30% to 35%, according to a market source.

The Rule 144A offering is being sold via bookrunners JPMorgan and Jefferies and has a $10 million greenshoe.

The bonds are non-callable for four years and then are provisionally callable for three years if shares exceed 130% of the conversion price. There are puts in years seven, 10 and 15.

There is takeover and dividend protection.

Proceeds will be used for the acquisition of Danfoss Bauer GmbH if and when the acquisition closes and for general corporate purposes.

Altra is an automotive parts supplier based in Quincy, Mass.

Mentioned in this article:

Altra Holdings Inc. Nasdaq: AIMC

Health Care REIT Inc. NYSE: HCN

Medicis Pharmaceutical Corp. NYSE: MRX

Medronic Inc. NYSE: MDT

PDL BioPharma Co. Nasdaq: PDLI

Salesforce.com NYSE: CRM

Thermo Fisher Scientific Inc. NYSE: TMO

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