Fitch Places CFR's IDRs on Rating Watch Positive on Proposed Acquisition by Abbott

CHICAGO--()--Fitch Ratings has placed all of the credit ratings of CFR Pharmaceuticals S.A. and its subsidiary CFR International SpA on Rating Watch Positive. A complete list of rating actions follows at the end of this press release.

Today's action follows the announcement that Abbott Investments Luxembourg S.A.R.L., a subsidiary of Abbott Laboratories (Abbott; 'A+') has entered into a definitive agreement to acquire 72.62% of CFR's issued and outstanding shares from its controlling shareholder and will conduct a public cash tender offer for all of the outstanding shares of CFR. Assuming all publicly-held shares are tendered, the total purchase price would be approximately $2.9 billion, plus the assumption of net debt of approximately $430 million. The acquisition is subject to regulatory and shareholder approvals.

Fitch expects the transaction to be approved by regulatory officials and to close during the second half of 2014 at which time the Rating Watch Positive will be resolved. Assuming the transaction is consummated on the agreed upon terms, the outcome is expected to result in at least a one-notch upgrade of CFR's long-term Issuer Default Rating (IDR) and senior unsecured debt. The upgrade could be significantly more than one notch if CFR's debt is guaranteed by Abbott and if it integrates CFR both financially and operationally.

Fitch believes Abbott's acquisition of CFR makes sense strategically, as it would increase Abbott's already strong position in the fast growing Latin American branded-generic pharmaceutical market. Developing markets such as Latin America are expected to provide the bulk for growth for this product segment. Abbott expects CFR to contribute approximately $900 million to its annual sales by 2015. The acquisition does pose some integration risk, but Abbott has stated that the financial success of this acquisition does not rely on anticipated significant cost synergies.

Fitch has placed the following ratings on Rating Watch Positive:

CFR Pharmaceuticals S.A.

--Long-term IDR 'BBB-';

--Local currency long-term IDR 'BBB-';

--National long-term rating 'A (cl)';

--National scale issue ratings and debt programs 'A (cl)'.

CFR International SpA

--Notes due in 2022 'BBB-'.

RATING SENSITIVITIES

--A positive rating action would likely coincide with the successful completion of the acquisition at which time the linkage between CFR and its new parent will be analyzed under Fitch's parent-subsidiary methodology. If the linkage is viewed as strong, CFR ratings could be upgraded significantly. A final decision will depend on the assessment of legal, operational and strategic ties between the two companies

--A negative rating action would result from the acquisition falling through. In this case, the Rating Watch Positive would be removed and the ratings affirmed at their current levels.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2013);

--'National Scale Ratings Criteria' (Oct. 30, 2013);

--'Parent and Subsidiary Rating Linkage' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=830724

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Contacts

Fitch Ratings
Primary Analyst
Cristina Madero, +1-312-368-3060
Associate Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst
Monica Coeymans, +56-2-499-3314
Director
or
Committee Chairperson
Joe Bormann, CFA, +1-312-368-3349
Managing Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Cristina Madero, +1-312-368-3060
Associate Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst
Monica Coeymans, +56-2-499-3314
Director
or
Committee Chairperson
Joe Bormann, CFA, +1-312-368-3349
Managing Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com