Microsoft has launched its first bond issue in hopes of raising US$3.75 billion, sparking rumors the US software giant was contemplating a takeover bid.
Microsoft, in a filing with the US Securities and Exchange Commission (SEC), said that it would use the money from the bond issue launched on Monday for “general corporate purposes” and planned to offer five-year, 10-year and 30-year notes.
The Redmond, Washington-based company announced its offering, which is set to close on Monday, would reach US$3.75 billion of senior unsecured notes.
Microsoft offered notes that would mature in five, 10 and 30 years. The sale was divided into US$2 billion of 2.95 percent notes due June 1, 2014; US$1 billion of 4.20 percent notes due June 1, 2019 and US$750 million of 5.20 percent notes due June 1, 2039.
The software giant “intends to use the net proceeds from the offering for general corporate purposes, which may include funding for working capital, capital expenditures, repurchases of stock and acquisitions,” it said in a statement.
Microsoft has already issued US$2 billion in commercial paper, or short-term debt, under a US$6 billion debt authorization made by its board late last year.
Moody’s Investors Service assigned a “AAA” rating, its highest, to the offering.
“The AAA rating for the company’s inaugural debt issuance reflects the company’s position as the world’s largest software company with a strong and defensible market position throughout its diverse core offerings,” Moody’s Richard Lane said.
Moody’s added that Microsoft’s “very strong debt protection measures are supported by over US$22 billion of operating profit and nearly US$12 billion of free cash flow in a challenging business environment.”
The company was rebuffed last year in a US$47.5 billion bid to take over Yahoo but management has since changed at the Internet firm and the two companies have reportedly discussed a potential partnership.
Microsoft chief executive Steve Ballmer has said repeatedly that he is open to a tie-up with Yahoo on Web search, dominated by rival Google.
Business software firm SAP was seen as another potential target for Microsoft.
J.P. Morgan Securities Inc is the lead underwriter on the sale.
Microsoft’s issue comes on the heels of offerings by Whirlpool Corp, Nokia Inc and Starwood Hotels & Resorts Worldwide Inc
Meanwhile, Ballmer said in Mumbai yesterday that Microsoft was mostly through with job cuts.
The company continues to hire more employees in some areas, Ballmer said, without elaborating.
He is on his second trip to India in three years.
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