Biogen Inc. plans to replace the $1.5 billion debt financing it secured for its purchase of Reata Pharmaceuticals Inc. with two term loans, according to a spokesperson for the company.
The biotech firm inked a bridge loan for up to $1.5 billion with JPMorgan Chase & Co., according to a filing, showcasing that banks are still open to lending for mergers and acquisitions. Biogen expects to fund the rest of the consideration with a combination of cash on hand and term loan proceeds, according to the filing.
“The rationale for the use of bank loans instead of issuing bonds is our intention to pay down the bank loans quickly over the next several years,” the spokesperson said in an emailed statement.
The transaction marks only the second blue-chip bridge loan this year, according to data compiled by Bloomberg, following Nasdaq Inc.’s $5.7 billion bridge secured in June. It’s the latest sign that banks stand ready to lend to select companies for M&A transactions as dealmaking has slowed significantly this year, according to data compiled by Bloomberg.
The financing comes as the bank-syndicated loan market is being hit by a fresh wave of uncertainty as the biggest banks stare down stricter capital requirements, which will alter the amount of capital they have to set aside as a safety buffer. The volume of investment-grade loans supporting such deals has shrunk to about $52.5 billion in 2023, down 39 percent compared to the same period last year, Bloomberg-compiled data show.
Biogen agreed to acquire Reata for $7.3 billion to expand its rare disease treatments in one of its biggest-ever acquisitions. It will pay $172.50 in cash for each Reata share, it said in a statement, confirming an earlier Bloomberg News report.
Bridge loans are typically later replaced with permanent financing in the bond market that is sold to institutional investors. Biogen will have to fund the deal within a year, since the bridge expires in 364 days, adding to the growing pipeline of M&A debt that could be sold in the investment-grade bond market this year.
Broadcom Inc. has $32 billion of debt commitments it secured in 2022 to help fund its purchase of VMWare Inc. Microsoft Inc.’s $69 billion purchase of Activision Blizzard Inc. will need financing. Both deals recently cleared regulatory hurdles, making it more likely they’ll go through this year.
Broadcom and Microsoft didn’t provide comment.
