S&P rates Fortive convertibles BBB-

S&P said it affirmed all of the ratings on Fortive Corp., including its BBB issuer credit rating and issue-level ratings.

Fortive announced a proposed $1.25 billion issue of convertible notes as part of the financing needed to acquire Johnson & Johnson's Advanced Sterilization Products business for $2.7 billion, S&P said.

The agency said it assigned a BBB issue-level rating to the proposed notes.

The outlook is stable, reflecting an expectation that Fortive's strong cash flow generation will support debt reduction following the increase in funded debt to finance acquisitions, S&P said.

The ratings reflect the company's improved product and end-market diversity, higher recurring revenue streams and continued strong free cash flow generation despite adjusted debt-to-EBITDA being slightly elevated over the next 12 months, the agency said.

Fortive had a very active 2018, closing on the Gordian acquisition for $775 million in July and following that up with a Accruent acquisition for $2 billion in September, S&P said.

The agency said it split off four operating companies from their automation and specialty segment for $3 billion, which included $1.4 billion of proceeds to Fortive.

These acquisitions are in line with the company's strategy of growing its portfolio through mergers and acquisitions, focusing on strong brands with high recurring revenues, S&P said.

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