Hubbell Inc logo

HUBB - Hubbell Inc News Story

$133.82 0.9  0.6%

Last Trade - 25/09/20

Large Cap
Market Cap £5.66bn
Enterprise Value £6.66bn
Revenue £3.41bn
Position in Universe 901st / 6400

US M&A lending hits early year high with jumbo loans

Fri 23rd February, 2018 5:09pm
By Lynn Adler 
    NEW YORK, Feb 23 (LPC) - A flurry of huge US acquisitions is 
pushing high-grade M&A lending to early year highs as blue-chip 
firms take advantage of US tax reform and try to fight off the 
threat of online retail giant Amazon. 
    Looser US tax rules could produce a record year for M&A 
deals. About US$120bn of M&A loans have been completed or are in 
process so far this year, including a record US$100bn loan 
backing Broadcom's hostile bid for rival Qualcomm. 
    This compares with US$203bn of loans completed in 2017, 
according to Thomson Reuters LPC data. 
    In a bid to fight off Broadcom, Qualcomm increased its own 
bid to buy NXP Semiconductors to US$44bn and said that it 
intended to fund the additional consideration with cash and new 
    In an eventful week, Broadcom also reduced its bid for 
Qualcomm to US$117bn from US$121bn, after objecting to 
Qualcomm's NXP bid. 
    Broadcom's record loan, which has required the biggest-ever 
bank commitments of more than US$10bn each from some lenders, 
has been receiving a positive response from lenders undaunted by 
its size. 
    "The Broadcom/Qualcomm deal shows that you can raise 
US$100bn pretty easily, and banks are clamoring to get in," a 
senior banker said. 
    Another jumbo multibillion dollar loan is looming for 
drugstore operator Walgreens to back its potential purchase of 
drug distributor AmerisourceBergen to boost its 26% stake. 
General Mills' US$8bn acquisition of Blue Buffalo Pet Products 
is also backed by a bridge loan provided by Goldman Sachs. 
    "Deals beget deals," the senior banker said. "To me, the 
single biggest change is that you've got clarity on tax and 
regulatory rules." 
    M&A deals backing Wyndham Worldwide Corp's purchase of La 
Quinta Holdings' hotel operations and Hubbell's acquisition of 
Aclara Technologies have already been completed this year. 
    The swelling pipeline also includes large financings backing 
the merger of beverage companies Dr Pepper Snapple Group and 
Keurig Green Mountain as well as Energizer Holdings' buy of 
Spectrum Brands' battery and portable lighting business. 
    M&A activity was muted in 2017 due to uncertainty about 
whether the Trump administration could push through the biggest 
overhaul of the US tax system in more than 30 years, but the 
bill was signed in late December. 
    The US corporate tax rate was cut to 21% from 35%, which 
helps to boost profits and better position some companies to 
pull the trigger on takeovers. 
    "There was uncertainty around tax at the end of the year, 
which made it hard to do a large deal, but now that there's 
clarity, some of that pent up demand for assets is going to come 
out," said another senior banker. "It's pretty broad-based: 
healthcare, pharma, tech, industrials." 
    Fear of online retailer Amazon is also driving consolidation 
that is reshaping entire sectors, spurred by the giant 
retailer's acquisition of upscale grocer Whole Foods Market last 
    "Amazon comes in and buys Whole Foods, and suddenly all hell 
breaks loose in grocery retail and everyone has to respond," the 
first senior banker said. "There's now Walgreens with 
AmerisourceBergen, seeking scale to compete with Amazon, which 
wants to get into the drug delivery chain. There are ripple 
effects everywhere." 
    February's stock market volatility appears to have subsided 
enough to keep the deal machine active as borrowing costs remain 
low and the economy gathers pace. Credit is plentiful and liquid 
banks are eager to lend and rack up related fees. 
    "The market is there in spades in terms of financing, and 
banks are beating each other up to participate in these 
financings," the first senior banker said. 
    While some companies are accelerating growth by making 
acquisitions, others, including General Electric and Honeywell 
International, will be shedding businesses to streamline and 
enhance profits. 
    Those spinoffs will also create demand for loans to support 
the new entities, helping to boost income earned from arranging 
the funding. 
    Lenders of the US$100bn in loans for Broadcom's proposed 
purchase of Qualcomm stand to pull in as much as US$300m to 
US$400m from upfront arrangement fees, according to Freeman 
Consulting Services. 
    If the US$31bn bridge-to-bond portion is replaced by bonds, 
there could be an added US$150m to US$200m earned on 
    If the deal materializes, these tallies alone will surpass 
fee income of just under US$300m earned by banks on all US 
investment-grade syndicated lending in last year's first 
quarter, Freeman's data show. 
 (Reporting by Lynn Adler; Editing by Tessa Walsh and Michelle 
 ((; 646-223-6307; Reuters 
Messaging:; Twitter 
@TRLPC @lynnadler)) 
Keywords: M&A LENDING/
© Stockopedia 2020, Refinitiv, Share Data Services.
This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.