8-KMaterial AgreementsFinancial EventsOther Events+1

THERMO FISHER SCIENTIFIC INC. 8-K Report, Material Agreement (Aug 11, 2017)

Filed August 11, 2017For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) filed an 8-K on August 11, 2017, detailing significant financing activities related to its anticipated acquisition of Patheon N.V. The company secured a $1.5 billion 364-day unsecured term loan facility to help fund the approximately $7.2 billion Patheon acquisition. This loan agreement includes covenants on debt-to-EBITDA and interest coverage ratios, indicating a focus on maintaining financial health during the acquisition process. Furthermore, TMO successfully completed a substantial equity offering, raising approximately $1.7 billion by selling over 8.7 million shares of common stock. The company also raised approximately $1.5 billion through a notes offering, issuing $750 million of 3.200% Senior Notes due 2027 and $750 million of 4.100% Senior Notes due 2047. The net proceeds from both the stock and notes offerings are earmarked for the Patheon acquisition, demonstrating a multi-faceted financing strategy to support this major corporate transaction.

Key Highlights

  • 1Thermo Fisher Scientific Inc. secured a $1.5 billion 364-day unsecured term loan facility to support the Patheon acquisition.
  • 2The Patheon acquisition is valued at approximately $7.2 billion, including Patheon's indebtedness.
  • 3The company raised approximately $1.7 billion in net proceeds from an underwritten public offering of its common stock.
  • 4Thermo Fisher also raised approximately $1.5 billion in net proceeds from a public offering of Senior Notes, consisting of $750 million of 3.200% Senior Notes due 2027 and $750 million of 4.100% Senior Notes due 2047.
  • 5Proceeds from the term loan, stock offering, and notes offering are primarily intended to fund the Patheon acquisition.
  • 6The term loan agreement includes financial covenants, such as a maximum consolidated indebtedness to consolidated EBITDA ratio of 5.0 to 1.0 (stepping down to 4.5 to 1.0 post-acquisition) and a minimum interest coverage ratio of 3.0 to 1.0.
  • 7The notes offering includes a special mandatory redemption clause if the Patheon acquisition does not close by February 15, 2018, or if the purchase agreement is terminated.

Frequently Asked Questions

The primary purpose of these financing activities is to fund Thermo Fisher Scientific's acquisition of Patheon N.V. The company has secured a term loan, completed a stock offering, and issued senior notes, with the net proceeds from all these transactions intended to finance the acquisition, which is valued at approximately $7.2 billion.

Thermo Fisher Scientific raised a total of approximately $1.5 billion from the term loan facility, approximately $1.7 billion in net proceeds from the stock offering, and approximately $1.5 billion in net proceeds from the notes offering. This aggregates to a significant amount of capital raised to support the Patheon acquisition.

The term loan agreement includes customary representations, warranties, and covenants. Notably, it requires the company to maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than 5.0 to 1.0, with a reduction to 4.5 to 1.0 after the acquisition closes. It also mandates a minimum interest coverage ratio of 3.0 to 1.0.

If the Patheon acquisition is not completed by February 15, 2018, or if the related purchase agreement is terminated, the company will be required to redeem all of the issued Senior Notes at a redemption price of 101% of the principal amount plus accrued interest. For the equity proceeds, if the acquisition is not completed, the company intends to use the net proceeds for general corporate purposes.