Moody's may lower STMicroelectronics

Moody's Investors Service said it placed the A3 rating of STMicroelectronics NV on review for possible downgrade following the company's announcement that it will combine its wireless operations with those of NXP BV and will pay $1.55 billion to NXP in order to gain an 80% majority stake in the venture.

In its review, the agency will focus on the rationale for a relatively high pro forma EBIT multiple for the compensation payment, the plan for realizing above market growth and material synergy benefits, management's strategy on how to replenish its cash reserves and conservative capital structure after the compensation payment and the potential impact of the put/call option structure on STMicroelectronics' future financing structure.

Moody's said it will also re-assess STMicroelectronics' strategy to reduce its exposure to the weakening dollar or mitigate its impact on profitability.

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