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CVS raising $15 billion in bond market to finance deals

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(Bloomberg) — Bond investors are lining up to finance CVS Health Corp.’s takeover of Omnicare Inc. and Target Corp.’s pharmacies and clinics.

See also: CVS to pay $1.9 billion for pharmacies inside Target stores

The drugstore owner received about $45 billion of orders for a bond sale of $15 billion, according to a person with knowledge of the deal. The demand is allowing CVS (NYSE:CVS) to lower yields it’s proposing on the six-part issue, said the person, who asked not to be identified because the information isn’t public.

“You’re seeing this influx of mega-offerings and what’s so interesting is that it seems that demand for these deals has been pretty high, despite their size,” said Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia.

CVS announced plans to raise as much as $20 billion in debt in a regulatory filing last month. The company is buying nursing-home pharmacy Omnicare Inc. in a deal valued at $12.7 billion and has a $13 billion bridge financing commitment from Barclays PLC and Deutsche Bank AG to back the takeover. CVS’s $1.9 billion acquisition of Target’s pharmacies and clinics business will also be funded with debt.

The longest and largest portion of the bond offering will be $3.5 billion of 30-year securities that may yield 1.9 percentage points more than similar maturity Treasuries, the person said. That’s 0.25 percentage point less than what was initially proposed.

The company also is said to be offering $3 billion of 10-year bonds at 1.55 percentage points more than benchmarks, according to the person. The rest of the deal includes three-, five-, seven-and 20-year maturities, the person said.

CVS Chief Executive Officer Larry Merlo is expanding into health care, striking the Target deal less than a month after agreeing to purchase Omnicare. The Target pharmacies bring the company to new markets including Seattle, Denver and Portland, Ore., and will help it reach a goal of operating 1,500 medical clinics by 2017.

See also: In-store clinic growth continues