Exclusive Loan Club Grows -- WSJ

By Liz HoffmanFeaturesDow Jones Newswires

With $20 billion CVS deals, Goldman and Barclays crash JPMorgan's party

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 7, 2017).

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Jamie Dimon, take note: There are two new members of the $20 billion loan club.

Goldman Sachs Group Inc. and Barclays PLC each will lend $20 billion to back CVS Health Corp.'s takeover of Aetna Inc., according to a regulatory filing late Tuesday. That puts them into an exclusive club -- pretty much inhabited only by JPMorgan Chase & Co. -- of big banks able to write checks of that size.

Bank of America Corp. will raise the remaining $9 billion of the $49 billion in financing CVS needs for the $69 billion deal. The transaction will combine CVS's pharmacy heft with Aetna's insurance operation.

It is the fourth-largest package of takeover debt ever assembled, edging past the $46 billion raised to fund the 2008 takeover of Anheuser Busch, according to Dealogic. The CVS borrowing is the second-largest U.S. merger financing on record.

The financing is a coup for both Goldman, which is pushing to be more of a takeover lender, and Barclays, which under former JPMorgan executive Jes Staley is trying to remain a top-tier player in the mergers game. These are the largest checks either firm has written for such a deal.

Takeover loans provide temporary financing for deals, bridging the gap between when a transaction is signed to when permanent funding can be locked down, typically through a sale of bonds.

For CVS, that is likely to happen in the spring. Meanwhile, its lenders plan to sell up to half of their loans to a group of about 20 additional banks and began marketing the debt to investors this week, according to people familiar with the matter. It is expected to carry a low investment-grade rating.

J.P. Morgan, the largest U.S. bank by assets, has dominated the market for deal-related megaloans. The firm, run by Mr. Dimon, has gone into at least four deals for $20 billion or more: AT&T Inc.'s pending takeover of Time Warner Inc.; the telecom giant's 2011 pursuit of T-Mobile US Inc.; the 2014 failed tie-up of AbbVie and Shire PLC ; and the merger of drugmakers Actavis and Allergan a year later. Its one real competition came from Bank of America, which arranged $17.2 billion for Abbott Laboratories' last big deal.

Goldman is trying to do more takeover lending. The firm is already a leading adviser in corporate M&A, but the real money in deals is often from raising and distributing the billions of dollars in bonds and loans needed to pull them off.

Last year, Goldman put a senior leveraged-finance banker in charge of the push. It is leading a $13.7 billion financing for Amazon.com Inc.'s takeover of Whole Foods Market Inc., and has also won debt assignments for mergers involving chip maker Qualcomm Inc., health-care services company Cardinal Health Inc. and laboratory supplier VWR Corp.

Barclays' relationship with CVS runs deep. It advised on the pharmacy chain's 2015 takeover of Omnicare Inc. and raised $13 billion solo for the effort.

Early merger talks between CVS and Aetna called for debt financing of about $40 billion, and both banks got internal approval for half of the amount, according to a person familiar with the matter. When CVS's stock stumbled this fall, the mix of consideration required more cash and Bank of America was brought in to close the gap.

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

December 07, 2017 02:47 ET (07:47 GMT)