Moody’s to review Daichii rating after Ranbaxy purchase, downgrade possible

June 12th, 2008 - 7:41 pm ICT by IANS  

New Delhi, June 12 (IANS) Global rating agency Moody’s Investors Service Thursday placed Japanese pharmaceuticals major Daiichi Sankyo Company Ltd (Daiichi Sankyo) on review for possible downgrade. The move comes a day after the Japanese company announced it was acquiring a controlling stake in Ranbaxy Laboratories Ltd, India’s largest pharma firm with global revenues of $1.6 billion.

The acquisition, for $4.6 billion in cash, includes the entire 34.8 percent equity held by its promoters.

In Moody’s opinion, the transaction can meaningfully affect Daiichi Sankyo’s net cash position. At the same time, Moody’s believes it would enhance its growth potential, especially in the generic pharmaceutical sector and emerging markets.

Moody’s review of Daiichi Sankyo’s Aa3 issuer rating will focus on the potential impact of the merger on its competitiveness and business strategy.

It will also re-address the company’s financial policy.

Moody’s believes the possibility of a multi-notch downgrade to Daiichi Sankyo’s final rating is very limited because the company has ample liquidity to support the bulk of the financing for the acquisition.

Its strong cash flow from operations may also allow it to restore its financial profile once the acquisition has been completed.

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