M&A pipeline lower after DuPont exits deal; related bond volume up in October, quarter slow

By Cristal Cody

Tupelo, Miss., Nov. 4 – DuPont de Nemours Inc. backed out of a $5.2 billion acquisition of Rogers Corp. (Baa1/BBB+) this week that had been pegged for potential high-grade funding needs in the bond market.

North America mergers-and-acquisitions-related investment-grade issuance climbed in October, while deal announcements were soft over the third quarter.

M&A-related high-grade bond supply jumped to $10.1 billion in October from $1 billion in September, according to a BofA Securities, Inc. research note.

The pipeline of announced deals with potential high-grade funding implications was at $355 billion in October, flat from September.

DuPont announced Tuesday that it pulled out of an agreement to acquire Rogers due to regulatory clearance hurdles after reporting in September that it had received all regulatory approvals except from China.

DuPont will pay a $162.5 million termination fee to Rogers.

DuPont also reported Tuesday that it has completed the divestiture of its former Mobility & Materials segment to Celanese Corp., which was sold for $11 billion in February.

Global M&A volume down

Global M&A activity experienced was slowest in the third quarter since the onset of the pandemic in 2020, S&P Global Ratings said in a report this week.

The aggregate deal value for the quarter was $443 billion, down 50% compared to the second quarter and a 58% drop from the third quarter of 2021, S&P said.

Global deal sizes also dropped in the third quarter as caution reigned.

Of the top 10 deals in the quarter, only three reached double digits, S&P said, while all top 10 global deals in the second quarter and eight of the top 10 deals in the first quarter were above $10 billion.

The largest high-grade deal from the M&A space seen this year was Magallanes, Inc.’s $30 billion 11-tranche offering of senior notes (Baa3/BBB-/BBB-) priced in March to fund a joint venture with AT&T Inc. and Discovery, Inc.

Kroger deal eyed

Some deals with high-grade funding potential expected this year include an offering still on the calendar from Oracle Corp. following the company closing in June on its $28.3 billion acquisition of Cerner Corp., according to market sources.

However, Oracle reported in September in a regulatory filing that it reduced its $15.7 billion bridge loan entered into in June after borrowing $4.4 billion in a term loan credit agreement in August and using the proceeds to reduce the loan amount to $11.3 billion.

Oracle had assumed $1.6 billion of senior notes and other debt through the acquisition of Cerner, of which $1.5 billion was paid on June 8.

More recently, Kroger Co. joined the potential deal pipeline in October after the company announced plans to acquire Albertsons for $24.6 billion, or $34.10 a share, in cash in a transaction not expected to close until 2024.

Citigroup Global Markets Inc. and Wells Fargo Securities, LLC provided the commitment on a $17.4 billion bridge loan.

Kroger’s merger is expected to be funded with $15 billion of new debt, including $10 billion to $11 billion of bonds and $4 billion to $5 billion in term loans, BofA said.

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