Moody's affirms Thermo Electron

Moody's Investors Service said it affirmed Thermo Electron Corp.'s Baa1 senior unsecured rating following the company's announcement of its proposed acquisition of the Kendro Products Division of SPX Corp. for $833.5 million in cash.

The outlook is stable.

Moody's said the Baa1 rating affirmation reflects Moody's expectation Thermo Electron will continue to achieve organic revenue growth in each of its business divisions. In addition, the affirmation reflects Kendro's leading presence in drug discovery products and services markets, strong 18% EBITA margin for fiscal year ended 2004 (in excess of Thermo Electron's 15% EBITA margin of its Life and Laboratory Sciences division), an improving addressable drug discovery market environment, and Thermo Electron's free cash flow generation approximating $200 million per year or more.

The rating agency noted, however, that the acquisition was fully priced and cost synergies associated with Kendro are expected to be modest. In addition, Thermo Electron may pursue sizable further acquisitions in the near term which could put downward pressure on its ratings.

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