That is to say -- potential high yield investors were apparently shying away from the deal, at current pricing.
So, while out on the West Coast leg of the road show, Goldman and Valeant, and by implication, "Fast" Fred, had to bump up the interest rates being offered to be paid on the debt.
This deal may yet not get done -- even in these loosening credit markets. Wow.
Of course, it's not that the coupon yield on the debt was priced too low -- that's just the symptom.
No, the root cause of the marketing problem is that Goldman (here conflicted!) has approved too high an overall price for B+L, at Fred's insistence. Thus, Valeant will need to take on too much additional debt, overall, to give Fred his $8.7 billion. That's why this deal may yet crater.
More later; here is Reuters on it all:.
. . . .According to market sources, the shorter dated tranche - which is expected to gain the most traction - is now being touted around a yield level of 7% from initial talk in the 6% range and then mid to high 6% late last week. . . .
"I think it's going to be tough to get such a big deal under way," said Gershon Distenfeld, director of high-yield debt at Alliance Bernstein. . . .
"When people have to sell to meet redemptions in a very illiquid market, their appetite to buy is not what it is in a normal market."
Goldman Sachs is lead-left bookrunner. . . . The two tranches are callable after three and five years respectively.
"My guess is that they will get this deal done but they will have to pay up for it," said Mark McCabe of KDP Investment Advisors, an independent provider of credit research and analysis.
"The acquisition doesn't close until September. They could put the deal on hold and come back in a few weeks when the market could be a little more receptive. . . ."
I still can't get over the idea that -- on a nearly $9 billion M&A deal -- where the acquirer is a public company (and thus the public shareholders are being asked to foot the bill for the deal) -- Goldman Sachs is sitting on BOTH sides of the table. Afterall, no reputable retained, independent banker party has opined that the deal is in any way fair to Valeant's pre-deal shareholders. Valeant just closed on over $2 billion of dilutive common shares issued, yesterday. And as I say, those are dilutive to the pre-deal shareholders. I've now looked far and wide -- and I cannot find another US public company M&A deal with a closed value of $8 billion or more, in the last five years -- where one bank was on BOTH sides. You've been amply warned.
7 comments:
On a different note; your opinion on the recent Supreme's decision?
Pretty sad, IMHO.
Yes it is.
I was moderately hopeful for a better outcome on the Voting Rights Act case, when yesterday the Court essentially punted on the latest affirmative action in education admissions case, returning that case to the lower courts for additional (albeit "strict scrutiny") proceedings.
The Voting Rights Act decision, as bad as it is, though -- is not a complete loss.
It simply now means that -- under Section 3 of the Act, governmental bodies seeking to redress racially-discriminatory polling procedures will have to make some showing that discrimination still exists in the relevant jurisdiction.
As a practical matter, there can be little doubt that -- in much of the South -- that showing will be easily met.
I don't like the decision, to be sure, but the dissent quite rightly called Section 3 a "bail-in" mechanism, and the majority took pains to say nothing about that.
So -- when I next handle a voting discrimination case, I'll rely on Section 3, and say that the Supremes had a chance to toss it -- but chose not to.
That's got to be worth something.
Namaste -- do stop back, my friend!
Just to follow up here, in its standard "take back, then give" mode -- the Supremes just now (10 AM EDT on Wed.) struck down DOMA, as unconstitutional.
This would say that the bill of rights plainly still embodies personal equal protection liberty interests.
This is a clear victory of all proponents of civil rights -- and human rights -- across the baord.
Just thought you'd like to know.
Finally, Prop. 8 in California is now officially dead.
It cannot be revived. It is unconstitutional on its face, as the District Court in California found.
Two very bid civil rights -- and human rights victories from the Supremes.
Nice.
So, to get back to your original question, the VRA decision is likely to have minimal practical impact, as Section 3 of the VRA still allows challenges to any discriminatory voting practice, so long as the challenger can offer some current evidence of discrimination.
Whew.
Namaste
Thanks for posting your opinion on DOMA and Prop 8. Very much agree~nice decisions by the SCOTUS for civil rights. Given our country's recent debates--I feel proud of the decision.
With those civil right outcomes, I wonder, do you think that their decision on VRA was more that Congress just has to fix Section 4?
My thoughts for this come from the fact(s) that other states (OH, PA and WI as expamples) are now putting forward more restrictive voter registration. It is not just those old bad boys from the past as we all know.
Also, aside from using Section 3, would the Executive branch be able to use Exec Orders to equalize across the entire country?
Keep up the good work for Merck~and making us aware of FF.
As I believe you predicted, Condor - merger spurred layoffs are now in motion.
http://www.pharmalive.com/valeant-to-layoff-up-to-2850-workers-after-bausch-lomb-deal#comments
Indeed, Anon. --
Thanks. Sadly, it looks like most of the cuts will come from Bausch & Lomb's corporate HQ groups -- many of whom were recently added, in anticipation of returning to the NYSE, and reporting as a public company, once again.
It also seems that B + L's HQ will move to NJ. (the legacy SP facility, possibly? No -- that would be too ironic!)
GIven that executives will sit in NJ -- I wonder if Fast Fred will be a more active presence on the board -- and less a figurehead.
For the people of B + L, let's hope not.
Namaste
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