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Rating Action:

Moody's confirms Merck KGaA's P-2 short-term rating, long-term ratings likely to be downgraded to Baa2 upon closing of Millipore transaction

29 Mar 2010

Frankfurt, March 29, 2010 -- Moody's Investors Service today confirmed Merck KGaA's (Merck) P-2 short-term rating and commented further on the impact of the announced €5.3 billion acquisition of Millipore Corporation (Millipore, rated Ba1, on review for possible upgrade) on Merck's A3 long-term rating, which is likely to be downgraded by two notches to Baa2 upon the closing of the transaction. The guidance assumes no major changes to the terms of the transaction as presented by Merck on March 01, 2010. At the same time, Moody's said that the ratings of Merck and Millipore will remain on review pending the closing of the transaction, which is -- subject to the approval of Millipore's shareholders and regulatory authorities -- expected to occur during the second half of 2010.

"While the €5.3 billion increase in net debt will initially weaken Merck's credit metrics to levels below those expected for a Baa2 rating, Moody's has taken comfort from the perceived commitment of Merck's management to retain a solid investment grade rating and to adhere to its deleveraging strategy, which should allow the company to reach credit metrics in line with a Baa2 rating category within 18 to 24 months after the closing of the transaction," said Sabine Renner, Moody's lead analyst for Merck KGaA. For Merck to be adequately positioned in the Baa2 category, we would expect improvements in metrics to the low Baa range as exemplified by a CFO/Debt above 30% and a FCF/Debt above 15%, while cash balances are likely to remain modest.

With the proposed acquisition of Millipore, a leading US based bioprocess and bioscience products and services company, Merck would strengthen its Life Science Chemicals Business -- leading to a more balanced business profile for the group - by adding approximately €1.2bn of sales and a complementary specialty product offering. Merck's chemical division will also obtain a more solid footprint in the US market and further improve its geographic diversity while at the same time reducing its reliance on liquid crystals, the second pillar in Merck's chemicals business, which was severely impacted by the global economic downturn.

Confirmations:

..Issuer: Merck Financial Services GmbH

....Senior Unsecured Medium-Term Note Program, Confirmed at P-2

..Issuer: Merck KGaA

....Issuer Rating, Confirmed at P-2

....Senior Unsecured Medium-Term Note Program, Confirmed at P-2

The last rating action on Merck was implemented on March 02, 2010, when Moody's placed Merck's A3/P-2 ratings on review for possible downgrade following the announcement of the Millipore acquisition.

The principal methodology used in rating Merck was Moody's Rating Methodology for the Global Pharmaceutical Industry. The methodology can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory on Moody's website.

Based in Darmstadt, Germany, Merck KGaA is a diversified group with worldwide operations in pharmaceuticals (including original drugs and healthcare products) and in the specialty value-added chemicals markets. It also holds a worldwide leadership position in liquid crystal production. Merck recorded revenues of EUR7.7 billion in 2009.

Paris
Eric de Bodard
Managing Director
Corporate Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Frankfurt
Sabine Renner
Analyst
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's confirms Merck KGaA's P-2 short-term rating, long-term ratings likely to be downgraded to Baa2 upon closing of Millipore transaction
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