Moody's Affirms Ratings of Mylan (MYL) Amid Meda Acquisition Deal

Moody's Investors Service affirmed the Baa3 senior unsecured ratings of Mylan N.V. and Mylan Inc (Nasdaq: MYL). This follows the announcement that Mylan has made an offer to acquire Meda AB for $9.9 billion in cash and stock. The outlook is stable.

"The acquisition of Meda will meaningfully increase Mylan's leverage -- to around 4.0x debt/EBITDA from around 2.5x." Said Moody's Senior Vice President, Jessica Gladstone. "However, there was substantial cushion built in to Mylan's Baa3 rating as we had anticipated that the company would continue to pursue large acquisitions following the failed bid for Perrigo Company plc (Baa3 stable) in late 2015" continued Gladstone.

The transaction is subject to regulatory approval and Meda shareholder approval, and is expected to close by the end of the third quarter of 2016.

Ratings of Mylan N.V. and Mylan Inc. affirmed:

Senior unsecured notes at Baa3

Outlook stable

RATINGS RATIONALE

Mylan's Baa3 senior unsecured rating is supported by its good scale with approximately $10 billion of annual revenue (growing to over $12 billion with the acquisition of Meda), strong global position in generic pharmaceuticals, and solid organic growth outlook given a healthy pipeline of new products. The acquisition of Meda AB will increase pro-forma debt/EBITDA to around 4.0x at the time of the deal close. Solid earnings growth and cash generation would result in rapid deleveraging. However, the rating also reflects Moody's expectation that Mylan will continue to pursue acquisitions and share repurchases making it unlikely that Mylan sustains financial leverage materially below 3.5x. That said, Mylan has consistently communicated a target leverage ratio of 3.0x (not including Moody's adjustments) and its commitment to maintain an investment grade credit profile.

The ratings outlook is stable, balancing Moody's expectation for good earnings with the likelihood that the company will continue to increase debt to fund its growth strategy.

Moody's does not expect a near-term upgrade of Mylan's ratings given the increase in leverage to acquire Meda and the rating agency's belief that Mylan will continue to pursue acquisitions. However, over time, Moody's could upgrade Mylan's ratings if the company successfully launches a number of high value products (for example, Copaxone, Advair, biosimilars), refrains from significant debt funded acquisitions and share repurchases, and demonstrates more conservative financial policies, including debt/EBITDA sustained below 3.0x.

Conversely, the ratings could be downgraded if Mylan completes very large debt funded acquisitions or share repurchases such that debt/EBITDA is expected to be sustained above 3.5x. Ratings could also be downgraded if the company encounters significant industry headwinds such as pricing pressure, or fails to launch high value products in its pipeline resulting in a weak growth outlook.

The principal methodology used in these ratings was that for the Global Pharmaceutical Industry published in December 2012. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

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