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Astra harnesses ripe bond market

Drugs behemoth AstraZeneca (AZN) takes advantage of a favourable bond market and may use excess capital raised to fund other deals
November 12, 2015

A blockbuster bond issuance by Anglo-Swedish pharma giant AstraZeneca (AZN) is likely to see it tuck away ammunition for future deals, according to a City analyst. The group raised $6bn to help it finance its approach for US-based ZS Pharma - although this is only expected to cost $2.7bn. The bond, which was vastly oversubscribed, is thought to be the largest healthcare yankee bond so far in 2015, and the seventh largest dollar bond ever issued by a UK company.

IC TIP: Hold at 4,202p

Some City analysts believe the group is being opportunistic and taking advantage of historically low bond yields to tuck surplus funds away for a rainy day. And one analyst said he suspected the extra cash would be used to fund more bolt-on acquisitions in the near term, although no other deals were on the table just yet.

The timing of the bond issue was interesting for other reasons, too. It followed downgrades from ratings agencies Moody's and S&P - the former took Astra to negative from stable and the latter from A+ to A. Moody's, in particular, has been highly critical of the significant premium Astra agreed to pay for ZS Pharma.