Pfizer Inc.'s agreement to take over Array BioPharma Inc. for $11.4 billion in cash, for which it will need to raise debt, is "beneficial" but adjusted net leverage is set to rise, S&P Global Ratings said on Monday. The credit appraiser revealed it placed the Dow Jones Industrial Average Component under watch with the expectation that its long-term grade would be lowered to AA- from AA following the proposed transaction.
The developer of early stage oncology treatments is set to strengthen Pfizer's position in the segment with its two approved drugs, several royalty contracts and products under development, the report adds and also points to the target entity's "highly productive research and development." Leverage is seen rising to 2.5 times, also given the $8.9 billion in share repurchases from the first quarter, the rating agency said and noted last year's level was at 1.7.
"We expect adjusted debt leverage to gradually decline after the acquisition, but that it will still exceed two for the next two years," the firm stressed and added the short-term A-1+ rating was unaffected.
