Perrigo (PRGO) Placed on Watch Negative at Standard & Poor's on Potential Mylan Deal

Standard & Poor's Ratings Services today placed all of its ratings on Dublin-based Perrigo Co. plc, (NYSE: PRGO) including its 'BBB' corporate credit rating, on CreditWatch with negative implications. We estimate debt outstanding at Perrigo at about $5.8 billion.

We also separately placed all of our ratings on Mylan Inc., including our 'BBB-' corporate credit rating, on CreditWatch with negative implications. (See our research update on Mylan, published today on RatingsDirect.)

The CreditWatch placement follows the announcement that Mylan N.V., parent of Mylan Inc., has made an unsolicited, indicative proposal to acquire Perrigo in a cash and stock transaction. Perrigo has indicated that its board of directors will meet to discuss the proposal. Financing for the potential transaction, which we estimate implies a close to $35 billion enterprise value for Perrigo, has not been disclosed.

If the proposed acquisition closes, we could lower the ratings on Perrigo to the same level as Mylan. It is possible we could lower our ratings on Perrigo by more than one notch, to non-investment grade status, depending on the amount of debt Mylan uses to finance the acquisition, and our evaluation of the merits of the proposed transaction, including strategic rationale, potential synergies, and integration risks.

If the transaction does not occur, we will re-evaluate our ratings on Perrigo, including whether we expect any changes to its financial policy, such as distributions to shareholders and future acquisitions. We stated previously at the current 'BBB' corporate credit rating that we could lower the ratings if we believe leverage will be sustained above 3x or funds from operations to total debt will remain below 30%.

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