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Fitch Assigns BBB Rating to Thermo Fisher Scientific €1.6B Senior Notes Offering

NEW YORK (GenomeWeb) – Fitch Ratings said today that it has assigned a BBB rating with a Stable outlook to Thermo Fisher Scientific's €1.6 billion ($1.80 billion) senior notes offering.

The agency said it expects to see the proceeds of the offering used to help finance Thermo Fisher's planned $4.2 billion acquisition of electron microscopy firm FEI Company, announced in May. Last week, FEI announced that its shareholders had approved the acquisition — the deal is expected to close by the end of the year.

Fitch said it calculated Thermo Fisher's pro forma gross leverage will be at around 3.5x once it completes its acquisition of FEI, but it expects that gross leverage to return to around 3.0x within 12 months after the completion of the deal — that level is consistent with a BBB rating, the agency added.

Further, Fitch said, Thermo Fisher's diversification across customer markets and product categories can insulate it against cyclical downturns or secular headwinds to sales or profitability in its end markets, and its ample free cash flow — which could exceed $3 billion in 2017 — should be sufficient to repay any debt issued to finance bolt-on acquisitions, as well as to fund share repurchases of at least $1 billion in 2016.

However, the agency added that it doesn't anticipate a near-term positive rating action for the company as that would require a commitment from Thermo Fisher to maintain leverage below 2.5x.

In August, Thermo announced it would issue €600 million of floating rate Senior Notes due 2018, and planned to use some of the proceeds to repay a term loan facility it entered into in order to finance its acquisition of Affymetrix. Fitch assigned a BBB rating with a Stable outlook to that senior notes offering as well.