Boston Scientific Corp. swept up Guidant Corp.
for
$27 billion in cash and stock last year, but the move so far has had a
marginal impact on the company's bottom line. After reporting a disappointing
second-quarter earnings last week attributed to lagging stent sales, credit
agencies Standard & Poor's and Moody's Investors Service lowered its debt
ratings on Boston Scientific. S&P downgraded its corporate credit rating
to BBB-, one notch above junk status. Meanwhile, Moody's lowered its rating on
Boston Scientific's senior unsecured debt to Ba2, two levels below investment
grade. Both companies carried a negative outlook on the company. "Moody's
uncertain sales recovery in key product lines and
heightened competition in 2008 could contribute to even lower operating cash
flows," Moody's senior credit officer Diana Lee said. With that assessment,
the company's next quarterly reports could be a continued downhill struggle.
Many industry insiders feel the Guidant addition has been a big mistake that
Boston Scientific will be paying for at least in the near term. Fortune magazine
went so far as to say in late 2006 that the Boston Scientific-Guidant hookup
was "the biggest M&A blunder since AOL/Time Warner." And maybe the recent
S&P and Moody's downgrades are just another warning signal that might be
true. —Gerald Magpily
See
TheStreet.com article
See
The Deals' Corporate Dealmaker article
Tags: Boston Scientific, Guidant, S&P, Moody's, M&A
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