Morning Commentary: Livongo Health, Teladoc convertible notes contract on merger news

By Abigail W. Adams

Portland, Me., Aug. 5 – While the convertibles secondary space continued to see light trading volume on Wednesday with no new paper entering the space, there were some large movements in the space following company news and earnings reports.

There was about $65 million in reported volume about one hour into Wednesday’s session.

Teladoc Inc.’s recently priced 1.25% convertible notes due 2027 and Livongo Health Inc.’s 0.875% convertible notes due 2025 were in focus and trading down on an outright and dollar-neutral basis following news the companies would merge.

The merger

Teladoc’s and Livongo’s recently priced convertible notes were in focus on Wednesday with both issues trading down on an outright and dollar-neutral basis following news the virtual health care companies would merge in a deal valued at $18.5 billion.

Teladoc’s 1.25% convertible notes due 2027 were down 9 points outright with stock off more than 17%.

The notes traded down to 122.875 with about $6 million in reported volume.

They contracted about 5 points dollar-neutral, a source said.

Teladoc stock traded to a low of $199.46 and was changing hands at $213.43, a decrease of 14.75%, shortly before 11 a.m. ET.

Livongo’s 0.875% convertible notes due 2025 sank more than 22 points outright with stock off more than 8%.

The notes, which had topped double par, were changing hands at 180.5 with about $10 million on the tape.

They were also down 5 points dollar-neutral.

Livongo stock was changing hands at $133.93, a decrease of 7.21%, shortly before 11 a.m. ET.

Livongo shareholders would receive 0.592 of a share of Teladoc stock in addition to $11.33 cash for each share in the transaction.

The convertible notes will remain outstanding in the merger.

The change-of-control clause was not triggered because the cash portion of the deal is only 7% and the threshold for a fundamental change is 10%, a market source said.

Teladoc priced a $1 billion issue of the 1.25% notes in May.

Livongo priced a $500 million issue of the 0.875% notes in early June.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.