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Announcement:

Moody's reviews Daikin for possible downgrade

Global Credit Research - 29 Aug 2012

NOTE: On November 5, 2012, the press release was revised as follows: Correct the publishing date of the rating methodology to December 29, 2010. Revised release follows:

Tokyo, August 29, 2012 -- Moody's Japan K.K. has placed the A3 long-term debt rating of Daikin Industries, Ltd. (Daikin) on review for possible downgrade.

This rating action was prompted by Daikin's announcement of its intention to fully acquire the Goodman Global Group, Inc. (B1)(*) for USD3.7 billion (approximately JPY296.0 billion) including assumption of Goodman's debt. (*: This Moody's Investors Service's rating is not governed by Japanese regulation.)

The transaction will be financed with a combination of debt and cash-on-hand. The proposed acquisition will have a significant impact on the size of Daikin's balance sheet and will negatively affect its leverage metrics.

Goodman is one of the largest US domestic manufacturers of heating, ventilation and air conditioning (HVAC) products for residential and light commercial use based on unit sales. The company's consolidated sales were approximately USD2.05 billion in FYE12/2011.

In Moody's view, the acquisition (1) is in line with Daikin's strategy (2) complements Daikin's product portfolio, which currently lacks ducted HVAC, (3) will strengthen Daikin's current relatively weak market position in the US, especially in residential applications, (4) will strengthen the company's market position further.

Moody's will assess Daikin's business strategy and the synergistic effects as a result of the business consolidation.

The review will take into consideration the impact on Daikin's financial flexibility and capital structure over the intermediate term.

Please see ratings tab on the issuer/entity page on the Moody's website for the last rating action and the rating history.

The principal methodology used in this rating was Moody's "Global Manufacturing," published on December 29, 2010, and available on www.moodys.co.jp.

Headquartered in Osaka, Japan, Daikin Industries Ltd. is a leading manufacturer of industrial-use air-conditioners and fluorochemical products. Its consolidated sales were JPY 1.2 trillion in FYE03/2012.

Noriko Kosaka
Vice President - Senior Analyst
Corporate Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Richard Chase Bittenbender
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's reviews Daikin for possible downgrade
No Related Data.

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