Aetna Sells $13 Billion of Bonds to Back Humana Purchase

Aetna Inc. sold $13 billion of new bonds Thursday to fund its $34 billion acquisition of Humana Inc., a move investors took as a sign that the deal is on track with antitrust regulators.

Split among eight tranches, the offering is the third-largest bond deal of the year, behind Anheuser-Busch InBev NV's $46 billion issuance in January and Dell Inc.'s $20 billion placement last month.

Shares of Aetna and Humana both rose, narrowing the discount at which Humana trades to the cash-and-stock offer price. That gap, around 17% at Thursday's close, is the smallest it has been since early April.

Closing the acquisition is still not guaranteed. A number of would-be acquirers have locked in financing for deals that ultimately failed on antitrust grounds and have been stuck paying fees for acquisitions that never happened.

Halliburton Co. issued $7.5 billion in bonds last fall for its acquisition of Baker Hughes Inc., which regulators scuttled earlier this year. It must now redeem at least $2.5 billion of that at a premium, plus interest. Staples Inc. paid at least $94 million in fees to raise a term loan backing its failed takeover of Office Depot Inc., according to a March filing.

Aetna reiterated Thursday that it expects to complete the deal, which is under regulatory review, later this year. It is facing intense scrutiny from regulators partly because the plan comes alongside another proposed merger, that of Anthem Inc. and Cigna Corp., that would winnow the top five health insurers to three.

The Wall Street Journal recently reported concerns inside Anthem and Cigna that their deal is losing ground to Aetna and Humana deal in the regulatory review process.

Among the Aetna bonds issued Thursday was a $2.8 billion, 10-year note, priced at 1.45 percentage points above Treasurys, a person familiar with the matter said. That resulted in a yield of around 3.24%, a small premium to the roughly 3.1% yield of Aetna's existing bonds due 2024 when they traded Wednesday, according to MarketAxess.

Bond issuances of $10 billion or more have become more common of late, as companies take advantage of low interest rates and strong demand from a global pool of investors. Both Apple Inc. and Exxon Mobil Corp. also topped that threshold this year, issuing $12 billion apiece in February.

Citigroup Inc. and UBS Group AG were joint active bookrunners on the Aetna bond deal.

Write to Sam Goldfarb at [e-mail] and Liz Hoffman at [e-mail]

(END) Dow Jones Newswires

June 02, 2016 21:05 ET (01:05 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.