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Fitch Affirms Rating for Thermo Fisher Scientific

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Fitch Rating today affirmed its "A-" issuer default rating for Thermo Fisher Scientific, following the firm's announcement that it plans to acquire allergy and autoimmune diagnostics firm Phadia for €2.47 billion ($3.5 billion).

The ratings apply to $4.3 billion of debt outstanding as of April 2. The ratings outlook on Thermo Fisher is "Stable," Fitch said.

It noted in a statement that the Phadia will be the second large acquisition by Thermo Fisher in 2011, following the completion of its $2.1 billion purchase of Dionex earlier this week. While debt funding for the two deals has resulted in deterioration of credit protection metrics, Fitch said that the company's overall credit profile "remains consistent with the 'A-' issuer default rating"

With a robust internal liquidity profile and a positive operating outlook for the life science tools and clinical diagnostics sectors, Thermo Fisher should be able to reduce its debt in the year to 18 months following the Phadia deal, Fitch added.

Thermo Fisher added about $2 billion in debt to the capital structure as a result of the Dionex deal, and the Phadia acquisition would add up to $3 billion more. Fitch said, however, that the firm's robust free cash flow generation should allow Thermo Fisher to have adequate cash on hand to retire "a good amount of debt" over the next 12 to 18 months.

The amount of acquired revenue and EBITDA is "small relative to the size of Thermo Fisher for both Phadia and Dionex." As a result, the impact on the company's credit profile in relation to financial integration risk and the potential upside related to operating synergies is "limited in the near term," Fitch said.

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