S&P Global Ratings placed its unsolicited ratings on Microchip Technology Inc. on CreditWatch with negative implications after the semiconductor manufacturer agreed to acquire chipmaker Microsemi Corp. for $10.2 billion.
The rating agency said the Microsemi deal would increase Microchip's pro forma leverage, which might not support the Arizona-based company's unsolicited BB corporate credit rating.
"However, we note the company's identified cost and revenue synergies of $300 million to be realized by the third year after the close of the transaction could help accelerate debt deleveraging," S&P said.
S&P plans to resolve the CreditWatch placement within 90 days after assessing how the acquisition will affect the buyer's current risk profile.
"Specifically, we will review the combined company's competitive position and deleveraging plans and assess its financial policy in the context of its strategic growth initiatives," the debt watcher said.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.
