S&P Puts AbbVie on Watch Negative After Allergan Deal
June 25 2019 - 2:37PM
Dow Jones News
By Michael Dabaie
S&P Global Ratings put AbbVie Inc. (ABBV) ratings on Watch
Negative after the company agreed to buy Allergan PLC (AGN) for
about $63 billion.
S&P said the CreditWatch placement is based on an increase
in leverage for the deal. The ratings agency said it believes the
company will reduce debt over the next two years. But, by then, it
will be closer to the entry of biosimilars in the U.S., affecting
its rheumatoid-arthritis treatment Humira, S&P added.
"Even if the company continues to reduce debt somewhat in 2022
and 2023, we believe the company could also increase its
acquisition spending at that point, providing greater uncertainty
around prospects for significant leverage improvement," S&P
said.
The combination adds immediate cash flow, increases therapeutic
and payer diversity and reduces product concentration, S&P
said. But the deal doesn't meaningfully improve the company's
pipeline nor its competitive position in a therapeutic area, the
ratings company said. There is some overlap in some of AbbVie's
smaller segments, such as neuroscience and women's health, but the
deal does little to augment AbbVie's immunology or hematologic
oncology segments, the S&P note said.
Also, the deal would transform AbbVie from a focused
biotechnology company with a strong position in immunology and
hematologic oncology to a large, diversified pharmaceutical
company. "Therefore, we believe there could be integration risk,"
S&P said.
S&P said when the deal has closed and based on the proposed
financing terms, it expects to lower the issuer credit rating to
'BBB+' from 'A-' with a stable outlook.
S&P put Allergan on CreditWatch Positive as it intends to
equalize ratings on Allergan with ratings on higher-rated
AbbVie.
Write to Michael Dabaie at michael.dabaie@wsj.com
(END) Dow Jones Newswires
June 25, 2019 14:22 ET (18:22 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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