S&P downgrades Mylan following acquisition plan

15 May 2007 09:10  [Source: ICIS news]

MUMBAI (ICIS news)--Standard & Poor’s (S&P) downgraded Mylan Laboratories to BB+ from BBB- on negative implications following its plans to acquire Merck KGaA's generics business for $6.7bn.

 

"The acquisition is expected to add a significant amount of debt and the US-based Mylan's financial policies and profile will be clearly inconsistent with an investment-grade rating," said S&P analyst Arthur Wong late on Monday.

 

Mylan had a somewhat limited track record in effectively integrating acquisitions, the international credit ratings agency said.

 

S&P said Mylan planned to issue about $1.5bn-$2bn of equity and equity-linked securities in the near term to reduce its leverage. However, it added the company’s total debt would increase, even if it assumed $2bn of equity.

 

Acquiring Merck's generics business would be Mylan's first major move into the much different, and in many ways more challenging, European generic drugs market, the credit ratings agency said.

 

The acquisition would expand Mylan's geographic base to more than 90 countries, pushing it to among the top three players in the growing worldwide generic drugs market in terms of sales, S&P said.

 

Given the amount of prospective debt, achieving synergy and revenue growth targets would be key if Mylan was to quickly improve on its credit protection measures, the credit ratings agency said.

 

 

 

By: Isha Jha
+65 6780 4359

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