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Fitch Rates Abbott Notes Offering at A(EXP)

NEW YORK (GenomeWeb) – Fitch Ratings on Friday assigned an A(EXP) rating with a Negative Rating Watch to Abbott Laboratories' notes offering.

The agency said it expects to resolve the (EXP) notation and the rating watch, and to downgrade Abbott to a BBB/F2 rating as more information about the notes offering becomes available. The company said it will use the proceeds to fund its acquisition of St. Jude Medical and to potentially fund its buy of Alere.

St. Jude is a good strategic fit for Abbott, Fitch noted, but the size of the acquisition — Abbott is paying $25 billion — "will significantly stress leverage for at least two years with or without the acquisition of Alere."

Further, Fitch said, while Abbott should be able to realize savings of $800 million within four years of both acquisitions, "the two acquisitions will significantly increase debt, with leverage forecasted to remain above 3.0x through 2019. Without the Alere acquisition, forecasted leverage would likely remain at or above 3.0x through 2018."

Fitch believes that Abbott will reduce its leverage to below 3.0x after that, through a combination of debt reduction and increased EBITDA. The agency's potential BBB/F2 post-transaction rating "assumes Abbott will pursue a more conservative approach to capital deployment, with share repurchases, dividend increases and acquisitions remaining modest," Fitch added.