Two leading credit ratings agencies have placed medical and industrial instruments maker Danaher Corp.'s credit ratings under review for possible downgrade because of Danaher's announcement that it is buying Beckman Coulter Inc.
Danaher Corp. said Monday it agreed to buy Beckman Coulter, a medical testing instrument maker, for about $5.87 billion. Danaher valued the purchase at $6.8 billion including Beckman Coulter's debt and its cash on hand. Danaher agreed to pay $83.50 per Beckman Coulter share, a 45 percent premium over Beckman's share price on Dec. 9 — the day before the acquisition rumors first surfaced.
Moody's Investors Service analyst Michael Mulvaney wrote in a note to investors late Monday that the review will consider risks including Danaher's higher leverage and the integration risk "given recent challenges to Beckman Coulter's operations." But he acknowledged potential strategic benefits from the acquisition, including an enhanced presence in life sciences and cost and capital disciplines that Danaher can bring to Beckman Coulter.
Standard & Poor's Ratings Service also said Monday that it placed Danaher's A+ corporate rating on credit watch with negative implications.
"We expect that this acquisition will increase Danaher's financial leverage to levels that are somewhat higher than what Standard & Poor's considers commensurate with the 'A+' rating," credit analyst Gregoire Buet said in a statement. Any downgrade would be limited to one notch, Buet wrote.
Beckman Coulter, which is based in Brea, Calif., had reportedly put itself up for sale in December.
Danaher has about $2.5 billion of rated long-term debt, Moody's said. Its current ratings are investment grade, A2 on long-term debt and Prime-1 on short-term debt. The deal is expected to be completed in the first half of the year.
Danaher shares rose $1.03, or 2.1 percent, to $50.06 in morning trading Tuesday.