About Moody's Careers Regulatory Affairs Terms of Use Contact Us

There are too many sessions currently in use on this account

Cancel

Please Note

We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""

The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.

Back to Previous Page

Email Research

Recipient email addresses will not be used in mailing lists or redistributed.

Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.

Enter the
characters you see

Can't read?
Try a new set

Send

Cancel

Email Research

Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.

Thank you!

You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.

Already a customer?

Don't want to see this again?

Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE”, you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s information that becomes accessible to you (the “Information”). References herein to “Moody’s” include Moody’s Corporation. and each of its subsidiaries and affiliates..

Terms of One-Time Website Use

1. Unless you have entered into an express written contract with www.moodys.com to the contrary and/or agreed to the Terms of Use at www.moodys.com or ratings.moodys.com, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.

2. CREDIT RATINGS AND MOODY’S MATERIALS FOUND ON WWW.MOODYS.COM OR SITES OTHER THAN RATINGS.MOODYS.COM MAY NOT BE DISPLAYED IN REAL TIME. FOR REAL-TIME DISPLAYS OF CREDIT RATINGS AND OTHER INFORMATION REQUIRED TO BE DISCLOSED BY MIS PURSUANT TO APPLICABLE LAW OR REGULATION, PLEASE USE RATINGS.MOODYS.COM.

3. You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities. Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision. No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.

4. To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

5. You agree to read and be bound by the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.

6. You agree that any disputes relating to this agreement or your use of the Information, whether in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.

I AGREE

Export PDF

Export CSV

Related Issuers

Bayer AG

Bayer Capital Corporation B.V.

Bayer Corporation

Bayer Holding Ltd.

Bayer Nordic SE

Gulf Coast Waste Disposal Authority, TX

Related Research

	Credit Opinion: Bayer AG: Regular update
	Credit Opinion: Bayer AG: Regular update
	Credit Opinion: Bayer AG: Update following downgrade to Baa2
	Credit Opinion: Bayer AG: Update following change in outlook to negative
	Credit Opinion: Bayer AG: Update following Outlook change

Rating Action:

Moody's affirms Bayer's A3 ratings; changes outlook to stable from positive

08 May 2014

London, 08 May 2014 -- Moody's Investors' Service has today affirmed the senior unsecured A3/P-2 ratings of Bayer AG ("Bayer" or "the Company") and changed the outlook on all ratings from positive to stable. The rating action follows the company's announcement of USD14.2 billion cash acquisition of the consumer care business from the US-based Merck&Co ("Merck", rated A2 stable).

"This transaction highlights Bayer's strong and consistent execution on its strategic objectives, that include a target of becoming the leading global player in the growing EUR 100 billion OTC (over the counter) consumer healthcare market. The deal will boost Bayer's positions in several key therapeutic categories globally and will broaden the company's distribution capabilities, particularly in the US, at the time of active consolidation in the OTC market. Bayer's winning bid also entails a wider strategic cooperation between the two companies in developing promising new cardiovascular medicines and will also allow Bayer to step up its presence in the US pharma market", said Elena Nadtotchi, Vice President Senior Credit Officer and Moody's lead analyst on the company. "Bayer will fund the USD 14.2 billion OTC acquisition by raising debt, including hybrid bonds. We expect that Bayer's financial profile will recover over the next 24 to 36 months, as the company's earnings and cash flow generation are set to strengthen significantly as a result of its prior investments".

On 6 May 2014, Bayer AG announced that it has reached an agreement with Merck to purchase its consumer care business for USD14.2 billion in cash. Merck's consumer care business reported approximately USD2.2 billion in revenues in 2013 (of which 70% were generated in the US) and comes with a strong portfolio of leading consumer care brands, which complements Bayer's geographic footprint and exposure to key therapeutic categories in the consumer care segment. The transaction is subject to the usual regulatory approvals, including by the antitrust authorities in the US. Bayer expects to close the transaction before the end of 2014.

Moody's understands that Bayer plans to fund the acquisition by placing senior and hybrid notes to refinance unsecured short-term bank loans put in place to fund the closing of the transaction.

RATINGS RATIONALE

Moody's decision to affirm Bayer's all A3/P-2 ratings reflects our positive assessment of the strategic rationale of the acquisition. Moody's expects the deal to strengthen Bayer's position in the profitable, stable and relatively capital un-intensive consumer care business and allow Bayer strengthen its global leading positions, in spite of recently announced consolidation of peers' consumer care businesses.

The affirmation of all A3/P-2 ratings is also underpinned by the expectation that Bayer will be able to reduce leverage in the next 24-36 months. As a result of the acquisition, Bayer will add debt and Moody's expects that its leverage will be close to 2.7x debt/EBITDA in 2014 (as adjusted by Moody's), compared to 1.6x at the end of 2013. Moody's expects that Bayer will deliver strong growth in earnings and operating cash flows in 2014-2016 on the back of strong performance of its new pharmaceutical products, as well as solid contribution by its Crop Science division and some improvement in the material science operations. Moody's expects this growth in earnings to drive leverage to below 2x in 2016. In the meantime, Bayer will continue to generate strong free cash flow and will retain flexibility to reduce debt.

Moody's notes the significant size of the acquisition and also acknoledges the company's track-record of successful integration and deleveraging, following several large acquisitions in the past. Moody's sees the expected use of hybrid bonds as an important credit supportive feature of the funding plan, characteristic of Bayer's conservative approach in managing its balance sheet and financial risks.

Bayer's A3/Prime-2 ratings are underpinned by the group's significant size and diversity of operations that spread across three main industries, with leading market positions in agriculture and materials, as well as strong organic growth momentum and leadership in health care.

Bayer's operating risk profile is increasingly determined by the developments in the health care businesses, as the company continues to strongly execute its organic growth agenda and integrates recent acquisitions in pharma and consumer health businesses. During current transitional period, Moody's will position the rating against a broad peer-group of selected pharmaceutical and chemical companies and may further adjust the financial guidance on Bayer's A3 rating to reflect the growing contribution of the healthcare business.

Rating outlook

The outlook on all the ratings has been changed to stable from positive. Following the OTC acquisition, Moody's expects Bayer to put in place a permanent capital structure that will include a meaningful hybrid component, and that the company will maintain the deleveraging course, such that its debt/EBITDA will decline sustainably below 2.5x in 2015 after the hybrid issuance and some deleveraging has taken place.

What could change the rating up/down

Moody's does not anticipate a negative pressure on the A3 ratings, given the fundamental strengthening of the business profile achieved by the company, that support the deleveraging assumptions. However, a delay in the expected recovery in the financial profile following the acquisition, with RCF/net debt sustained below mid-twenties level, could put a negative pressure on the A3 ratings.

An upgrade of the rating would require a resolute recovery in the credit profile, with Debt/EBITDA maintained sustainably below 2x and (RCF)/net debt maintained over 30%. An upgrade will also depend on Bayer's management strategy and financial policy, including its ability to maintain greater financial flexibility to support growth measures. Moody's will also look for an improving trend in returns in the Material Science division, to support the assumption of a stable business model.

Liquidity Profile

Bayer maintains a strong liquidity profile. It is supported by a substantial cash and short-term investments balance of c. EUR2.7 billion at the end of 1Q 2014 and the expectation of strong and improving operating cash flow generation over the next quarters.

The company maintains access to a EUR3.5 billion RCF which was fully undrawn at the end of Q1 2014 and does not contain any restrictive covenants. Moody's expect the facility to remain undrawn on closing of the acquisition.

In 1Q 2014, Bayer placed c. EUR 2.5 billion in senior notes to fund its EUR 1.9 billion acquisition of Algeta ASA in Norway and to help meet c. EUR 1.3 billion in bond maturity in September 2014.

The methodologies used in these ratings was the Global Chemical Industry Rating Methodology published in December 2013 and Global Pharmaceutical Industry published in December 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Based in Leverkusen, Germany, Bayer AG is a diversified group with strong positions in HealthCare, CropScience, and high-quality polyurethanes and polycarbonates. In 2013, the group reported consolidated revenues of EUR40.2 billion and EBITDA before special items of EUR8.4 billion (EUR39.7 billion and EUR8.3 billion respectively for 2012).

Outlook Actions:

..Issuer: Bayer AG