NEW YORK (GenomeWeb News) – Fitch Ratings today affirmed its long-term rating on Agilent Technologies' debt at 'BBB+' and revised its outlook to stable from positive, following Agilent's announcement earlier in the day that it would split into two separate, publicly traded firms.
Agilent said that the life sciences and diagnostics business, which also includes its genomics and applied markets products, will retain the Agilent name. It has annual revenues of around $3.9 billion.
The electronic measurement business, which will spin out into a new publicly traded entity that has yet to be named, has annual revenues of about $2.9 billion.
"The revision of Agilent's Outlook to Stable from Positive reflects Agilent's reduced revenue and free cash flow base and diversification, pro forma for the separation," Fitch said in a statement. "Fitch also believes achieving leadership positions in targeted molecular diagnostics and clinical markets may require increased flexibility for acquisitions."
Among the concerns listed by Fitch is competition from Thermo Fisher Scientific, "which is significantly larger and aggressively expanding its genomics capabilities." In addition, Thermo Fisher is in the process of acquiring Life Technologies, which will result in an organization four times as large as Agilent's life sciences and diagnostics business with a similar profitability profile.
Fitch also noted the US government's sequester and its impact on academic and government research markets. Such customers currently account for around 12 percent of Agilent's life sciences and diagnostics revenues, and as a result organic growth for the business will be limited in the near term, said Fitch.
It further noted that Agilent held $2.3 billion in cash and cash equivalents as of July 31, along with $2.7 billion in total debt, and more than $500 million in annual free cash flow.
Fitch affirmed a 'BBB+' rating for Agilent's issuer default rating, senior unsecured revolving credit facility, and senior unsecured notes.
Agilent's stock was trading up 4 percent at $51.25 in Thursday afternoon trade on the New York Stock Exchange.