Why Is The St. Jude Acquistion A Risky Bet For Abbott?
The St. Jude acquisition announced by Abbott (NYSE:ABT) is expected to provide significant synergies and the much needed growth for Abbott. However, this merger sets off alarm bells for Abbott’s investors, as the company will have to take on significant leverage to fund the acquisition. This might worsen the company’s debt ratios. Because of this, the rating agency – Fitch has also maintained a negative rating watch for Abbott. In the analysis below, we show how the net debt-EBITDA ratio of Abbott would increase post-merger. It must be noted that the net debt-EBITDA ratio shows how many years it would take for a company to pay back its debt, if net debt and EBITDA are held constant.
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