The long-term ratings on Nestlé S.A. and related entities were placed on CreditWatch with negative implications on Jan. 16, 2001, following the announcement of the group's $10.3 billion cash bid (plus $1.2 billion in assumed debt) for U.S. pet food manufacturer Ralston Purina Co. (BBB+/Watch Pos/A-2). The CreditWatch placement reflects Standard&Poor's belief that the unfavorable impact of the transaction on the company's financial profile could more than outweigh the business benefits. The acquisition would represent just under 2.5 times 1999 funds from operations (FFO) of SFr8 billion. If Nestlé is to maintain its 'AAA' long-term rating, coverage of net debt by FFO should not dip appreciably below 90% (compared with 108% at year-end 1999). From a business viewpoint,
