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Rating Action:

Moody's Says Becton's New Financing Plan Will Result in Likely Downgrade to Baa2 versus Baa3

25 Nov 2014

New York, November 25, 2014 -- Moody's Investors Service said that Becton, Dickinson and Company's A3 senior unsecured rating, while remaining under review for downgrade, is likely to fall to Baa2. This represents a change in Moody's prior view that Becton Dickinson's ratings would likely fall to Baa3. The revised view follows Becton's announcement that it has changed its financing plan to acquire CareFusion Corporation, using about $1.4 billion less debt than it originally disclosed (about $7.7 billion instead of about $9.1 billion). The company will use more excess cash, totaling $2.8 billion, with its equity contribution remaining the same at $1.9 billion. Moody's also confirmed Becton's short-term Prime-2 rating.

Ratings remaining on review for downgrade:

Becton, Dickinson and Company

A3 Senior unsecured rating

A3 Issuer rating

(P) A3 Senior unsecured shelf rating

Rating confirmed:

Becton, Dickinson and Company

Prime-2 short-term rating

Under the new financing plan, Becton's initial financial leverage will be lower than originally expected and Moody's anticipates that the company will be focused on deleveraging. Becton has indicated that it will refrain from share buybacks to help support deleveraging.

Moody's review will focus on Becton's final financing plans, the likely timeframe for achieving synergies, and the time it will take to return credit metrics to levels supportive of a solid investment grade rating. Moody's will also evaluate the underlying operating trends for both companies, and management's commitment to refraining from share repurchases and acquisitions in order to focus on debt repayment.

RATINGS RATIONALE

Becton's current A3 rating is supported by the company's relatively strong market position (particularly for its injection systems), good product and geographic diversification, and moderate leverage. Because its medical products are less technology-intensive than those of some other medical device companies, Becton benefits from lower volatility in market share and earnings. US sales growth will be in the low single-digit range, but new products and very solid international sales growth lend support. Becton's emphasis on safety products will continue to help it expand in emerging markets, but it will be negatively affected by softness in diagnostic testing and cutbacks in bioscience research funding. Longer term, the company remains vulnerable to alternative forms of medication delivery -- particularly in the area of diabetes.

CareFusion's drug dispensing and administering as well as other medical products will add scale and diversification to Becton's hospital-based medication management business. But these benefits are offset by CareFusion's concentration in large, US hospital-based capital products, which are typically subject to soft sales trends. Also, the strategic benefits behind leveraging Becton's strength in emerging markets are uncertain as it is difficult to determine the extent to which these markets will adopt higher priced capital equipment. Compared to BD's other medical products, the strategic fit of the Pyxis dispensing cabinets, which are not directly used in medical procedures, is unclear. Pyxis technology could help Becton develop information systems to help reduce medication errors, but this could take years to develop.

The principal methodology used in these ratings was Global Medical Products and Device Industry published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Becton, Dickinson and Company ("Becton"), headquartered in Franklin Lakes, New Jersey, is a medical technology company that manufactures a broad array of medical products, laboratory equipment and diagnostic products.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Diana Lee
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Says Becton's New Financing Plan Will Result in Likely Downgrade to Baa2 versus Baa3
No Related Data.
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