Moody’s affirms Pfizer

Moody's Investors Service said it affirmed the ratings of Pfizer Inc. and related subsidiaries, including the A1 senior unsecured long-term rating and the Prime-1 commercial paper rating.

The outlook remains stable.

This action follows the announcement that Pfizer will acquire Allergan plc in a stock transaction valued at about $160 billion. The deal is expected to close in the second half of 2016.

The acquisition will bolster Pfizer's scale, diversity and research pipeline, and reduce its exposure to patent cliffs. Tax benefits are also significant, improving access to global cash, although offset by high shareholder payouts as the primary anticipated use of cash. The transaction will require no incremental debt to close, but is moderately leveraging because of Allergan's higher debt/EBITDA.

Moody's projects pro forma debt/EBITDA of about 2.6 times in 2016, declining to 2 times within two years after close.

"The combination creates a global pharmaceutical powerhouse with strong scale and diversity and will improve Pfizer's overall growth rates from the low single-digits to the mid-single digits, based on Allergan's higher growth rate," Moody's senior vice president Michael Levesque said in a news release. "At the same time, we anticipate that shareholder payouts will reduce cash levels over time – a credit negative."

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