Reata Pharmaceuticals: Biogen secures $1.5B loan to fund Reata buyout, with three-year repayment schedule baked in

Biogen has lined up a $1.5 billion term loan to fund its $7.3 billion acquisition of Reata Pharmaceuticals. The company had made clear its intentions to finance the acquisition with both cash and debt in its August announcement. The loan, for which JPMorgan Chase Bank acted as the administrative agent, sets up two different tranches so that Biogen may repay half of the loan within a year and the other half within three years, according to an SEC filing. The bid for Reata marked Chris Viehbacher's first big move since he became CEO of Biogen, and it's also Biogen's largest M&A play since it merged with Idec in a $6.8 billion deal back in 2003. Its last major deal was the $877 million pursuit for Nightstar Therapeutics in 2019. At the heart of the deal is Reata's treatment for Friedreich's ataxia, Skyclarys, which is approved in the US and being reviewed in Europe - beefing up Biogen's rare disease portfolio. Biogen beat a mysterious potential buyer - reported to be Sanofi - to seal the deal, following a bidding war over several months. Under the credit agreement, Biogen will get the entire amount in a single drawing when the deal closes, which is expected to happen in the fourth quarter. This new loan replaces a bridge loan, of the same amount, that JP Morgan had agreed to provide earlier. A Biogen spokesperson previously told Bloomberg that "the rationale for the use of bank loans instead of issuing bonds is our intention to pay down the bank loans quickly over the next several years." If the acquisition closes on time, that means Biogen would have to repay $750 million from the one-year tranche A in 2024 and $750 million from the three-year tranche B in 2026. It can also make voluntary prepayments. Biogen expects the Reata deal to be "roughly neutral" to its earnings in 2024 and "significantly accretive" starting in 2025, per its previous statements.