Harris Corp is seeking to raise US$3.7bn of new debt to support its planned US$4.75bn acquisition of US aerospace and defence engineering firm Exelis.
The financing is split between a US$2.4bn five-tranche senior unsecured bond offering and a US$1.3bn…
Harris Corp is seeking to raise US$3.7bn of new debt to support its planned US$4.75bn acquisition of US aerospace and defence engineering firm Exelis.
The financing is split between a US$2.4bn five-tranche senior unsecured bond offering and a US$1.3bn senior unsecured term loan facility.
The former comprises US$500m of 1.99% notes due 2018, US$400m of 2.7% notes due 2020, US$600m of 3.83% notes due 2025, US$400m of 4.85% notes due 2035 and US$500m of 5.05% notes due 2045. All the notes priced at par.
Morgan Stanley and Citigroup are lead arrangers and bookrunners on the transaction with BofA Merrill Lynch, HSBC, SunTrust Robinson Humphrey and Wells Fargo Securities joint bookrunning managers.
The financing is rated Baa3 / BBB- / BBB- and the settlement date for the bond offering is 27 April.
The debt offering will be used to replace the US$3.4bn fully committed bridge financing that Harris’ adviser Morgan Stanley agreed to provide for the acquisition.
The proposed US$4.75bn merger was first announced in mid-February with the two parties expecting it to be completed by June.
While the takeover has been unanimously approved by the boards of both companies, it still needs approval from Exelis’ shareholders as well as the regulators. It is currently awaiting clearance from the antitrust authorities with the waiting period under the HSR Act expiring on 23 April 2015. Harris stated that it believes that there is a significant possibility that the waiting period will be extended as it will be required to provide further information.
Under the terms of the proposed transaction, Harris will pay a total purchase price of US$23.75 per share, split 70/30 in cash and stock. The offer represented a 36% premium on the 3-month trailing average of Exelis’ stock and represents a valuation multiple of 9.3 times Exelis’ 2014 EBITDA guidance.
A number of analysts have suggest that the deal, if it goes ahead, could well kick start consolidation among the lower tier US defence contractors who need to reposition themselves in the face of lower US DoD budgets.
