TEXT-S&P: Owens & Minor ratings unchanged by Movianto deal
July 24 - Standard & Poor's Ratings Services said today that its ratings on Richmond, Va-based medical products distributor Owens & Minor Inc. (OMI; BBB/Stable/--) are not affected by the company's binding offer to acquire the majority of the Movianto Group, a European health care third-party logistics business, for approximately EUR130 million in cash. The acquisition is generally in line with our expectations and will complement Owens & Minor's U.S. health care third-party logistics activities. Owens & Minor had about $214 million of cash as of March 31, 2012, which should allow the company to fund the acquisition without altering our view of its "intermediate" financial risk profile. Our ratings on OMI incorporate its "satisfactory" business risk profile and intermediate financial risk profile. Our assessment of OMI's business risk profile as satisfactory reflects the company's position as the largest pure-play distributor of medical supplies and devices to U.S. hospitals. The expanded global reach of its logistics platform provides some potential for growth and increased diversity. The ratings already consider the effect of the struggling U.S. economy that we believe will limit organic growth to the low-single digits in 2012 and 2013. We view OMI's financial risk profile as intermediate. As of March 31, 2012, credit metrics appear strong relative to our intermediate financial risk profile guidelines--funds from operations (FFO) to lease-adjusted debt exceeded 50% (versus our 30% to 45% guideline) and lease-adjusted debt to EBITDA was 1.4x (below our 2x to 3x guideline). These strong credit measures provide some flexibility for future acquisitions or an unforeseen contraction of its already narrow margins.
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