|[May 19, 2014]
Fitch Places CFR's IDRs on Rating Watch Positive on Proposed Acquisition by Abbott
CHICAGO --(Business Wire)--
Fitch Ratings has placed all of the credit ratings of CFR
Pharmaceuticals S.A. and its subsidiary CFR International SpA on Rating
Watch Positive. A complete list of rating actions follows at the end of
this press release.
Today's action follows the announcement that Abbott Investments
Luxembourg S.A.R.L., a subsidiary of Abbott Laboratories (Abbott; 'A+')
has entered into a definitive agreement to acquire 72.62% of CFR's
issued and outstanding shares from its controlling shareholder and will
conduct a public cash tender offer for all of the outstanding shares of
CFR. Assuming all publicly-held shares are tendered, the total purchase
price would be approximately $2.9 billion, plus the assumption of net
debt of approximately $430 million. The acquisition is subject to
regulatory and shareholder approvals.
Fitch expects the transaction to be approved by regulatory officials and
to close during the second half of 2014 at which time the Rating Watch
Positive will be resolved. Assuming the transaction is consummated on
the agreed upon terms, the outcome is expected to result in at least a
one-notch upgrade of CFR's long-term Issuer Default Rating (IDR) and
senior unsecured debt. The upgrade could be significantly more than one
notch if CFR's debt is guaranteed by Abbott and if it integrates CFR
both financially and operationally.
Fitch believes Abbott's acquisition of CFR makes sense strategically, as
it would increase Abbott's already strong position in the fast growing
Latin American branded-generic pharmaceutical market. Developing markets
such as Latin America are expected to provide the bulk for growth for
this product segment. Abbott expects CFR to contribute approximately
$900 million to its annual sales by 2015. The acquisition does pose some
integration risk, but Abbott has stated that the financial success of
this acquisition does not rely on anticipated significant cost synergies.
Fitch has placed the following ratings on Rating Watch Positive:
CFR Pharmaceuticals S.A.
--Long-term IDR 'BBB-';
--Local currency long-term IDR 'BBB-';
--National long-term rating 'A (cl)';
--National scale issue ratings and debt programs 'A (cl)'.
CFR Internationl SpA
--Notes due in 2022 'BBB-'.
--A positive rating action would likely coincide with the successful
completion of the acquisition at which time the linkage between CFR and
its new parent will be analyzed under Fitch's parent-subsidiary
methodology. If the linkage is viewed as strong, CFR ratings could be
upgraded significantly. A final decision will depend on the assessment
of legal, operational and strategic ties between the two companies
--A negative rating action would result from the acquisition falling
through. In this case, the Rating Watch Positive would be removed and
the ratings affirmed at their current levels.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2013);
--'National Scale Ratings Criteria' (Oct. 30, 2013);
--'Parent and Subsidiary Rating Linkage' (Aug. 5, 2013).
Applicable Criteria and Related Research:
Corporate Rating Methodology: Including Short-Term Ratings and Parent
and Subsidiary Linkage
National Scale Ratings Criteria
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