Stanley Black & Decker notches strong debut; Dermira deal touted; Becton Dickinson does well

By Rebecca Melvin

New York, May 12 – Stanley Black & Decker Inc.’s new 5.375% convertible traded up Friday after the New Britain, Conn.-based diversified power tool maker priced a slightly upsized $675 million of the three-year equity units.

With its strong 2.5-point to 3-point move upward on a dollar-neutral, or hedged, basis, the Stanley Black & Decker deal qualified as one of the two best deals of a busy new-deal week.

The other winner was the $250 million of 3% five-year convertible notes from Dermira Inc., which made a similar, 3 point move upward on a hedged basis earlier in the week, a New York-based sellsider said.

The convertible primary market was bustling this past week, with $3.93 billion of new convertibles having priced. The other deals included Becton, Dickinson & Co.’s $2.48 billion of 6.125% mandatory convertible preferred stock, which priced late Wednesday and continued to trade well on Friday; a $350 million sale of 0.75% convertible notes due 2022 from DexCom Inc.; and a $175 million offering of 3.25% convertible notes due 2024 from Kaman Corp.

On Friday, Stanley Black & Decker and Becton Dickinson were both active and doing well.

“Both deals went very, very well for both outright and hedged players,” a New York-based trader said. “They were a nice win for the convertibles market.”

From the previous week, HubSpot Inc.’s new $400 million of 0.25% convertible notes due 2022 continued to trade on Friday and were closing in on 99, which was up about 0.7 point on the day, according to Trace data. Shares of the Cambridge, Mass.-based cloud-based sales and marketing software, were also a little better, closing the session at $69.45, which was up 40 cents, or 0.6%.

Back in established issues, pricing was a little weak due to the large amount of new issuance, but trading action was light, a sellsider said.

“It’s been very quiet,” he said of Friday’s session.

There were no sector movements to speak of, and the market simply seemed “burned out” from so many new deals, the sellsider said.

Whether strong new issuance will continue next week was uncertain. But given that earnings season is winding down, there may be a pickup in deals.

Stanley Black & Decker gains

The new Stanley Black & Decker “traded well right out of the gate,” a New York-based sellsider said. The name is investment grade and attracts a wide circle of players and there was also a solid comfort level because Stanley Black & Decker has been an issuer in the convert market before. The company priced a $300 million issue of 6.25% equity units in 2013.

The new Stanley Black & Decker convert was last seen at 102 after trading up as high as 103.5 bid, 104 offered early in the session on the back of a higher stock price in the premarket, a New York-based trader said.

That represented a 2.5 point gain for the new paper on a dollar-neutral, or hedged, basis, the trader said.

By the market close, with shares of Stanley Black & Decker turning lower, or down $1.11 to $136.99, and the hedged move for the equity units was closer to a 3 point gain. Earlier in the session the shares had been up about 0.2% at $137.86.

It “traded very nicely,” a trader said.

The deal was increased to $675 million from the $650 million originally announced.

The overallotment option is $75 million, reduced from $97.5 million.

The coupon was below the 5.5% to 6% talk while the conversion premium was in the middle of the 15% to 20% talk.

Proceeds will be used for general corporate purposes, including the repayment of short-term borrowings. The company will also use some of the funds for capped-call transactions which have a cap of $179.53, 30% above the stock closing price on Thursday.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and Wells Fargo Securities LLC were the joint bookrunners of the deal.

Becton Dickinson remains positive

Becton Dickinson shares started the session higher, or up $1.61, or 0.9%, at $186.51 early Friday trading, while the Becton Dickinson 6.125% mandatory convertible preferreds were up about 20 cents on swap. Shares of the Franklin Lakes, N.J.-based medical technology company finished off the session lower, however, or down 24 cents, or 0.13%, at $184.62.

On Thursday, the mandatories closed around 52, and were called higher on swap by about 20 cents.

“They are moving up nicely,” a trader said. “All the focus has been on the new issues.”

On Friday, a $225 million over-allotment option on the mandatories was exercised, bringing the total size of the mandatory to $2,475,000,000, according to a company update.

As reported, the company priced $2.25 billion of the 6.125% convertible preferreds on Wednesday with an initial conversion premium of 20%.

The company also sold $2.25 billion of common stock and the underwriters exercised the over-allotment option for that offering as well, lifting the total deal size to$4.95 billion.

As reported, price talk on the convertible preferreds was 6% to 6.5% with an initial conversion premium of 17.5% to 22.5%.

Citigroup Global Markets Inc., J.P Morgan Securities LLC, Morgan Stanley & Co. LLC, MUFG, BNP Paribas Securities Corp., Barclays and Wells Fargo Securities LLC were the bookrunners on the preferred deal.

Dermira up 3 points on swap

The Dermira 3% convertibles due 2022 traded on Friday at 103.5, which was up another 0.5 point on the day on an outright basis and better on swap by 3 points, a New York-based sellsider said.

Shares of the Menlo Park, Calif.-based biopharmaceutical skin condition drug developer have not recovered from their sharp drop on May 10 when the convertible deal was announced. But they were up 51 cents, or 1.9% to $26.92 at the market close on Friday.

A sellsider said the deal was “well priced.”

Dermira is using proceeds for working capital, capital expenditures and other general corporate purposes. Dermira may also use a portion of the net proceeds from this offering to expand its business by in-licensing or acquiring product candidates, technologies, compounds, other assets, commercial products or complementary businesses; however, Dermira has no current commitments or obligations to do so.

Leerink Partners and Cowen & Co. were the joint bookrunners of the notes.

Mentioned in this article:

Becton, Dickinson & Co. NYSE: BDX

Dermira Inc. Nasdaq: DERM

DexCom Inc. Nasdaq: DXCM

HubSpot Inc. NYSE: HUBS

Kaman Corp. NYSE: KAMN

Stanley Black & Decker Inc. NYSE: SWK

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.