A brigade of bulge-bracket investment bankers are lining up to market the upcoming $750 million debt offering by Thermo Fisher Scientific Inc. (NYSE:TMO).
Proceeds from the deal, first announced earlier this week, will be used to redeem nearly $227 million in 30-year, floating rate convertible notes due in 2033, with the remaining funds tabbed to buy back approximately $515 million of debt at 6.125 percent interest and maturing in 2015. The new notes will be floated in two tranches — $450 million of notes maturing in 2015 and yielding 3.2 percent and a series of 10-year notes with a 4.7 percent coupon.
Banc of America Securities, the investment banking subsidiary of the commercial banking giant Bank of America (NYSE:BAC), will be responsible for finding buyers for about $184 million of the principal amount, or nearly one-quarter of the overall offering. Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. are set to offer notes totaling $151 million and $137 million, respectively, according to an underwriting agreement filed late April 22 with the federal Securities & Exchange Commission.
Overall, 16 investment banks will have a piece of the deal. Thermo Fisher officials said they expect to land about $741 million in net proceeds after paying underwriting fees.
According to an April 20 news release, $1,000 worth of the 2033 convertible notes can be turned into 33.84 shares of Thermo Fisher common stock. That works out to a conversion price of $29.55 per share, or nearly half Thermo Fisher’s current share price on the open market.
The notes are a holdover from the 2006 merger between Thermo Electron Corp. and Fisher Scientific International Inc. Fisher acquired the notes in August 2004 as part of its buyout of Apogent Technologies, which originally used the cash to buy back stock and pay down a term loan.
Since assuming responsibility for the issue, the Waltham, Mass.-based instruments maker has been paying a floating yield equal to the 3-month LIBOR rate, minus 125 basis points (now a near-negligible 0.18 percent, but previously climbing as high as 5.3 percent in late 2007 before the recent economic crisis prompted a sharp decline in interest rates).
The 2015 notes are another Fisher remnant, issued in June 2005 as part of efforts by the New Hampshire-based company to refinance and extend the maturities of its debt. In all, Thermo Electron took on nearly $1.8 billion of Fisher debt and will have re-worked all but about $330 million of convertible senior subordinated notes once the upcoming offering settles.