Research Update: 3M Co. Outlook Revised To Negative On $6.7 Billion Acquisition Of Acelity Inc.; 'AA-' Ratings Affirmed

3M Co. announced it agreed to acquire medical technology company Acelity Inc. for a total consideration of $6.7 billion, and plans to finance the deal with mostly debt (commercial paper and new bonds) and some balance sheet cash. The acquisition is expected to close in the second half of 2019. As a result, we believe 3M's S&P Global Ratings-adjusted debt to EBITDA will increase to mid-2x in 2019 after the acquisition closes. While we expect the company to generate strong free cash flow and delever to around 2x in 2020, there is limited cushion to the debt leverage metric relative to our 2x downside threshold. Therefore, we are affirming all ratings on 3M, including our 'AA-' issuer credit rating, and

...- 3M Co. announced it agreed to acquire medical technology company Acelity Inc. for a total consideration of $6.7 billion, and plans to finance the deal with mostly debt (commercial paper and new bonds) and some balance sheet cash. The acquisition is expected to close in the second half of 2019. - As a result, we believe 3M's S&P Global Ratings-adjusted debt to EBITDA will increase to mid-2x in 2019 after the acquisition closes. While we expect the company to generate strong free cash flow and delever to around 2x in 2020, there is limited cushion to the debt leverage metric relative to our 2x downside threshold. - Therefore, we are affirming all ratings on 3M, including our '##-' issuer credit rating, and revising our outlook to negative from stable. - The negative outlook reflects a possible downgrade if 3M fails to delever to below 2x debt to EBITDA over the next two years while it integrates its new acquisition....

Research Update