RPT-Fitch: No Impact on Cerba's Rating from Acquisition in South Eastern France

Mon Apr 7, 2014 5:34am EDT

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April 7 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says that France-based clinical pathology laboratory group Cerba European Lab SAS's (Cerba; B+/Stable) acquisition of a network of 40 laboratories including six technical platforms in the South East of France for an estimated enterprise value of less than EUR90m has no impact on Cerba's rating.

While this bolt-on acquisition may slightly dilute Cerba's EBITDA margin initially, we consider that Cerba will manage to achieve cost savings from the enlarged group in the near term, especially on reagent purchasing terms and by transferring some of the target's operations onto Cerba's existing platform in the Marseille area. We also deem integration risk to be low, supported by Cerba's sound track record at past bolt-on acquisitions.

Cerba plans to fund up to the entire amount of the acquisition with additional senior secured debt. If successful, the acquisition would, at worst, lead to a marginal increase in financial leverage in 2014, after adjusting for expected cost savings. However, on a pro forma basis, we forecast the group's funds from operations (FFO) adjusted gross leverage to remain below 6.5x and the FFO fixed charge cover above 2.0x by 2015-2016, provided that Cerba maintains a disciplined approach toward future acquisitions. These credit metrics are consistent with a 'B+' IDR within the healthcare sector and are supported by Cerba's resilient operating and financial performance, reflected in steady EBITDA and FFO growth.

We believe that the acquisition fits into Cerba's consolidation strategy in France. It will also strengthen Cerba's market position in the South East of the country and increase the group's scale as the target generated about EUR45m of sales and EBITDA should reach about EUR13m after expected synergies For additional rating drivers, please refer to Fitch's rating action commentary Fitch Affirms Cerba at 'B+'; Stable Outlook, dated 12 March 2014.

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