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Rating Action:

MOODY'S ASSIGNS A Ba2 RATING TO THE SENIOR SECURED CREDIT FACILTIES AND A B2 TO THE SENIOR SUBORDINATED NOTES OF BIO-RAD LABORATORIES, INC.; RATING OUTLOOK IS STABLE.

29 Sep 1999
MOODY'S ASSIGNS A Ba2 RATING TO THE SENIOR SECURED CREDIT FACILTIES AND A B2 TO THE SENIOR SUBORDINATED NOTES OF BIO-RAD LABORATORIES, INC.; RATING OUTLOOK IS STABLE. Moody's Investors Service assigned a Ba2 rating to the $200 million senior secured credit facilities and a B2 to the $125 million senior subordinated notes due 2009 of Bio-Rad Laboratories, Inc. ("Bio-Rad"). The senior credit facilities consist of a $100 million five-year term loan and $100 million five-year revolver. The senior implied rating of Bio-Rad is Ba3 and the rating outlook is stable. The subordinated notes and credit facilities are being established to fund Bio-Rad's acquisition of Pasteur Sanofi Diagnostics ("PSD") and to refinance existing debt. This is the first time that Moody's has rated the debt of Bio-Rad, a provider of products and services to the life science, clinical diagnostics and analytical instruments markets.

The ratings reflect the company's leverage following the transaction as well as the substantial consideration being paid for PSD and the risks associated with its integration. Positive factors supporting the ratings include the leading market share positions held by the company's primary product lines, its broad product offering which generates significant recurring revenue, its well diversified customer base, and the complementary nature of the PSD clinical diagnostics business.

Bio-Rad's primary business lines, life science and clinical diagnostics, supply a wide variety of instruments and consumable products used in biological research and diagnostic testing. The company's products hold leading market share positions, and the consumable nature of many of these products generates significant recurring revenue. Bio-Rad's customer base, consisting mainly of research organizations and diagnostic laboratories, is well diversified, with no customer representing more than 2% of sales. The company's products are sold in 70 countries through a direct sales force of over 450 sales and service people. These factors combine to lend a degree of stability to Bio-Rad's core businesses. Moody's notes that in recent years the company has demonstrated steady revenue growth, offset to a degree by currency translation related to the strong U.S dollar. In addition, margins have been relatively stable in its various product lines, with some fluctuation primarily attributable to acquired product mix.

The acquisition of PSD, a French in-vitro diagnostics (IVD) company, offers Bio-Rad the opportunity to significantly broaden its product offering and market access in IVD. While both companies enjoy strong niche market positions within clinical diagnostics, there is virtually no product overlap between the two. In addition, the complementary geographic presence of the two companies should enhance cross-selling opportunities.

Despite these potential benefits, Moody's believes that the successful integration of PSD represents a significant challenge. PSD represents Bio-Rad's largest acquisition to date, and the integration plan includes substantial cost saving measures, sales office and manufacturing facility consolidations, and organizational restructuring. Moody's notes that the purchase price of $210 million represents a significant multiple of roughly 15.5 times PSD's 1998 EBITDA. Further, the acquisition will add approximately $150 million in goodwill to Bio-Rad's balance sheet. Given these considerations, the PSD operations will need to show substantial improvement in earnings in order for Bio-Rad to generate returns in line with its historical performance.

Following the transaction, Bio-Rad's leverage will be somewhat high, with pro forma total debt equaling 3.3 times pro forma EBITDA and 56% of total book capitalization. In addition, coverage is modest with pro forma EBITDA covering interest expense 3.1 times and pro forma EBITA (excluding depreciation from the calculation to reflect a necessary level of capital reinvestment) of 2.3 times.

Structurally, the Ba2 assigned to the senior credit facilities reflects their senior position in the capital structure as well as a security interest in substantially all of the assets of the company and its domestic subsidiaries and a pledge of the 100% of the stock of domestic and 65% of the stock of foreign subsidiaries. Moody's believes that this security package provides sufficient coverage of senior debt in a distressed scenario. The B2 assigned to the senior subordinated notes reflects their subordination to all present and future senior indebtedness of the company and guarantees from all future material domestic subsidiaries. Moody's notes that there is a significant concentration in Bio-Rad's equity ownership, with the Schwartz family holding a majority voting interest.

Bio-Rad Laboratories, Inc., headquartered in Hercules, CA, is leading provider of products and services to the life science, clinical diagnostics and analytical instruments markets.

No Related Data.
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CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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