01 May 2018 by lberuti
Today was quieter with a good part of Continental Europe closed for Labour day, but yesterday was extremely busy with regards to M&A transactions. In the US, T-Mobile US Inc agreed to acquire Sprint Corp for $26Bln in stocks, and Marathon Petroleum Corp agreed to buy rival Andeavor for $23.3Bln in the biggest ever deal for an oil refiner that will create the largest independent fuel maker in the US. In Europe SBRY ( J Sainsbury Plc ) said it will purchase UK grocery chain Asda from Walmart Inc’s for about $10Bln, in the form of £3Bln in cash and a 41% stake in the combined business. SBRY currently does not have a rating and its only outstanding debts are two convertible bonds and a £250mln hybrid note. But even after it borrows the money to pay Walmart, analysts expect the new company to be a stronger credit than SBRY in its current form. They are a tad more cautious than the company which expects to have an investment grade going forward though, and reckon that an implicit support from Walmart would be needed to push it solidly into the investment grade category. Investors nevertheless greeted the proposed transaction by sending SBRY’s 5-year risk premium almost 40bps tighter over the last 2 sessions. It closed tonight at 100bps.