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Shire selling long-awaited M&A bond

By Hillary Flynn

NEW YORK, Sept 19 (IFR) - Drugmaker Shire is selling a four-tranche M&A bond on Monday to help finance its acquisition of Baxalta (Berlin: 9BX.BE - news) , a long anticipated trade that is expected to be up to US$12bn in size.

The company, rated Baa3/BBB-, is sticking to tenors of 10-years and under on the US dollar deal, and has set initial price thoughts at Treasuries plus 120-125bp for the three-year, T+140-145bp on the five-year, T+160bp-165bp on the seven-year, and T+175-180bp on the 10-year.

The 10-year appears to be offering a new issue concession of between 15-20bp based on where the company's outstanding 4% 2025s bonds were trading at G+159bp and after adjusting for the slightly longer maturity on the new deal.

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Investors expect the bond to be well received. Market conditions are stable, and the trade was heavily marketed last week during a multi-day roadshow. Shire (Xetra: S7E.DE - news) is also selling the debt ahead of two central bank meetings on Wednesday.

"The deal has everything going for it timing-wise," one syndicate banker away from the deal said.

"And it gets in before the Fed announcement in the middle of the week."

Order books were about US$25bn at midday Monday, sources said.

The CDX IG 26 index was 1.5bp tighter at 74.45bp on Monday, according to MarketAxess.

Bank of America Merrill Lynch, Barclays (LSE: BARC.L - news) , and Morgan Stanley (Xetra: 885836 - news) are the active bookrunners on the deal.

Shire deal is one of five investment-grade corporates looking to sell debt on Monday.

Oil producer Hess (Ba1/BBB-/BBB) has set initial price thoughts at T+300bp area on a new 10-year bond and T+362.5bp area on a new 30-year.

American Airlines (Xetra: A1G.DE - news) is selling a two-part US$813.797m EETC pass through note, Providence St. Joseph Health Obligated Group (Aa3/AA (Other OTC: AATDF - news) -/AA-) is selling a US$600m two-part deal with 10-year and 31-year maturities, while S&P Global Inc (NYSE: SPGI - news) (Baa1/Nr/BBB+) is selling a 10-year benchmark note. (Reporting by Hillary Flynn; Editing by Natalie Harrison and Shankar Ramakrishnan)