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Roper Closes $2.7B Notes Offering, To Use Proceeds for Buyout

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Roper Technologies, Inc. (ROP - Free Report) yesterday announced the completion of its public offering of $2.7 billion worth senior notes. The company priced the senior notes on Aug 18, 2020.

Notably, the company’s shares gained 2.2% yesterday, ending the trading session at $436.41.

Inside the Headlines

The notes offered comprised $300 million of 0.450% senior notes set to mature on Aug 15, 2022; $700 million of 1.000% senior notes with expiry date on Sep 15, 2025; $700 million of 1.400% senior notes due on Sep 15, 2027 and $1 billion worth of 1.750% senior notes due on Feb 15, 2031. The notes on offer will be Roper’s senior unsecured obligations.

Significantly, the company priced the notes due in 2022 at 99.913% of the principal amount. Interest on these notes will be paid twice a year on Feb 15 and Aug 15 with the first payment due on Feb 15, 2021. Further, Roper offered the 2025 notes at 99.868% of the principal amount. It will pay interest each year on Mar 15 and Sep 15 (with the first payment to go on Mar 15, 2021) on these notes.

For the 2027 notes, interest payment will be made on Mar 15 and Sep 15 (the first to be cleared on Mar 15, 2021). These notes were offered to the public at 99.860% of the principal amount. In addition, the 2031 notes were offered at 99.839% of the principal amount. Interest on these notes will be paid on Feb 15 and Aug 15 every year — the first payment to be made on Feb 15, 2021.
 
Roper will have to compulsorily redeem all the senior notes if the Vertafore buyout is not completed on or before Feb 12, 2021, and the date of termination of Vertafore’s acquisition agreement (whichever comes earlier). Per the special mandatory redemption, the price for the notes will be 101% of the principal amount plus interest (accrued and unpaid).

It is worth mentioning here that Roper will acquire Denver, CO-based Vertafore for $5.35 billion cash. The buyout, announced on Aug 13, is expected to be completed in third-quarter 2020.

In addition to the special redemption, Roper has the option to redeem the 2022 senior notes before Aug 15, 2022 for a consideration equal to Treasury+10 basis points and accrued interest, if applicable. For the 2025 notes, the redemption can be done before Aug 15, 2025 for Treasury+15 basis points or on par plus accrued interest (if applicable) on or after Aug 15, 2025.

The optional redemption for the 2027 notes can be done before Jul 15, 2027 for Treasury+15 basis points. If the redemption is carried out on or after Jul 15, 2027, the price will be equal to the par value plus accrued interest (if applicable). Similarly, for the 2031 notes, the optional redemption can be executed before Nov 15, 2030 for Treasury+20 basis points or on par plus accrued interest (if applicable) on or after Nov 15, 2030.

The company noted that part of the proceeds from the offerings will be used for paying for the Vertafore buyout and its related expenses. The remaining proceeds will likely be used for general corporate purposes.

We believe that the offerings of senior notes will increase the company’s debt and in turn, might inflate its financial obligations and hurt profitability as well. Exiting the second quarter of 2020, its long-term debt was $5,263.8 million, reflecting a 12.6% increase from the previous quarter. The company’s interest expenses totaled $47.5 million in the June quarter, reflecting a sequential increase of 4.6%.

Zacks Rank, Estimate Trend and Price Performance

With a market capitalization of $44.7 billion, Roper currently carries a Zacks Rank #2 (Buy). The company is likely to gain from its strengthening medical product and network software businesses, cost-control measures and buyouts.

In the past three months, its share price has rallied 8.8% compared with the industry’s growth of 10.7%.



The Zacks Consensus Estimate for its earnings per share is pegged at $12.54 for 2020 and $14.33 for 2021, indicating growth of 3.1% and 10.6% each from the respective 60-day-ago figures. However, the EPS estimate of $3.01 for the third quarter has been lowered 2.3% in the past two months.

Roper Technologies, Inc. Price and Consensus

Roper Technologies, Inc. Price and Consensus

Roper Technologies, Inc. price-consensus-chart | Roper Technologies, Inc. Quote

Other Stocks to Consider

Three other top-ranked stocks in the industry are Tennant Company (TNC - Free Report) , Altra Industrial Motion Corp. and Graco Inc. (GGG - Free Report) . While Tennant currently sports a Zacks Rank #1 (Strong Buy), both Altra Industrial and Graco carry a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these companies have improved for the current year. Further, earnings surprise in the last reported quarter was 380.00% for Tennant, 76.47% for Altra Industrial and 37.04% for Graco.

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