S&P puts CareFusion on positive watch

Standard & Poor’s said it placed its ratings on CareFusion Corp., including its BBB corporate credit rating, on CreditWatch with positive implications following higher rated Becton Dickinson’s announcement that it plans to acquire CareFusion in a $12.2 billion deal funded by a mix of cash, equity and debt.

“We view Becton Dickinson’s proposed acquisition of CareFusion as complementary, and that the combined businesses further support Becton Dickinson’s ‘strong’ business risk profile. However, the resultant significant increase in debt leverage at the combined company, based on the announced terms of the financing, would result in an ‘intermediate’ financial risk profile, highlighted by debt leverage above 2x and funds from operation to net debt of sub-30% over the intermediate term,” S&P said in a news release.

However, despite the increase in leverage, S&P said it would likely lower its ratings on Becton Dickinson to BBB+, one notch higher than CareFusion’s current BBB corporate credit and senior unsecured debt ratings. As such, assuming that the deal is completed on the announced financing plans and that the CareFusion debt remains outstanding, S&P said it would most likely raise the ratings on CareFusion to BBB+.

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