CSL share price lifts amid US$4b debt raise

The biotech giant’s shares are on the rise after the company announced details of a debt raise.

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Key points

  • The CSL share price is in the green after the company announced details of its bond issue
  • The US$4 billion will be used to fund the acquisition of Vifor Pharma
  • This deal is planned to grow CSL’s earnings into new areas

The CSL Limited (ASX: CSL) share price is edging higher in early trading after the ASX healthcare share revealed details of its debt funding for its acquisition of Vifor Pharma Ltd.

At the time of writing, CSL shares are swapping hands for $265.66 apiece, a gain of 0.44%.

The biotechnology giant intends to use the cash proceeds from the offering to partially finance the proposed acquisition of Vifor, which the company announced in December 2021. Some of the money will also be used for general corporate purposes.

What did CSL announce?

The CSL share price is gaining after the company revealed it has priced US$4 billion of bonds in the US market. The notes were issued by CSL Finance and are guaranteed by the parent company.

There were six different tranches of notes:

  • US$500 million of 5-year notes with an interest rate of 3.85%
  • US$500 million of 7-year notes with an interest rate of 4.05%
  • US$1 billion of 10-year notes with an interest rate of 4.25%
  • US$500 million of 20-year notes with an interest rate of 4.625%
  • US$1 billion of 30-year notes with an interest rate of 4.75%
  • US$500 million of 40-year notes with an interest rate of 4.95%

Management commentary

CSL chief financial officer Joy Linton said:

We are pleased with the outcome of the bond issue from both a demand and pricing perspective. It also provides depth and flexibility for our long-term capital management program.

The strong support shown by investors towards our inaugural US dollar bond issue reflects positively on our track record of disciplined financial management, as well as confidence in our strategy to invest in our leading therapeutic capabilities and generate sustainable growth.

Vifor acquisition

CSL said the regulatory process for the Vifor Pharma acquisition is on track to be completed by June 2022.

The company has also completed a A$6.3 billion institutional placement to fund the deal.

CSL describes Vifor Pharma as a global specialty pharmaceutical company with leadership in renal disease and iron deficiency.

CSL also said it would enhance CSL’s patient focus and ability to protect the health of those facing a range of rare and serious medical conditions. It also expands CSL’s presence in the rapidly growing nephrology market.

In terms of the financial side, CSL said it would add to revenue and cash flow. It was expecting to be able to achieve US$75 million of pre-tax cost synergies over three years after the deal is completed.

Management expects the deal to add to underlying net profit after tax (NPAT) in the low-to-mid-teens in the first full year of CSL ownership, including the cost synergies. This could be helpful for the CSL share price.

One of the latest ratings comes from Citi. It rates CSL as a buy with a price target of $335. That implies a potential upside of around 26%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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