Research Update: Perrigo Co. PLC Downgraded Two Notches To 'BB' On High-Multiple Acquisition; Outlook Stable

Dublin-based global consumer self-care company Perrigo Co. PLC intends to acquire French self-care company Héra SAS, referred to as HRA Pharma, for approximately $2.1 billion, likely funded with a mix of balance sheet cash (approximately $1.8 billion), the undrawn $1 billion revolving credit facility, and other sources. Although we expected Perrigo to use proceeds from its generics divestiture to fund acquisitions, HRA is larger and the price is at a higher multiple (about 20x) than our expectations. We expect pro forma adjusted net debt to EBITDA of about 4.5x in 2021 and 2022, about 1.5x higher than our prior expectations. We are lowering our long-term credit rating on Perrigo to 'BB' from 'BBB-'. The stable outlook reflects our expectation for

...- Dublin-based global consumer self-care company Perrigo Co. PLC intends to acquire French self-care company HTra SAS, referred to as HRA Pharma, for approximately $2.1 billion, likely funded with a mix of balance sheet cash (approximately $1.8 billion), the undrawn $1 billion revolving credit facility, and other sources. - Although we expected Perrigo to use proceeds from its generics divestiture to fund acquisitions, HRA is larger and the price is at a higher multiple (about 20x) than our expectations. - We expect pro forma adjusted net debt to EBITDA of about 4.5x in 2021 and 2022, about 1.5x higher than our prior expectations. - We are lowering our long-term credit rating on Perrigo to '##' from '###-'. - The stable outlook reflects our expectation for adjusted debt to EBITDA to remain in the 4x-5x area over the next 12 to 24 months from litigation and modest acquisitions and share repurchases mostly offsetting EBITDA growth....

Research Update