Moody's downgraded Bayer AG's senior unsecured notes rating and the senior unsecured medium-term note program rating to Baa1 from A3, with a negative outlook.
The downgrade follows the German agrochemical giant's acquisition of Monsanto Co. Bayer said it will help finance the deal, valued at $62.5 billion, through an issue of shares and debt.
Moody's said the Baa1 rating reflects the increased financial leverage it expects Bayer to report, which includes assumed net financial debt and pension obligations of around $6 billion.
However, the rating agency noted the sound strategic rationale behind the acquisition, given the companies' highly complementary crop science portfolios. Moody's also said the merger, besides benefiting Bayer's overall business profile, will create the largest player in the agricultural chemical and seeds sector.
The negative outlook reflects the near-term impact of integrating Monsanto into Bayer. The stabilization of the outlook will depend on Bayer making good progress in integrating its acquisition and keeping on track to meet its cost synergy target in 2022.
S&P Global Ratings made a similar rating action and downgraded the company's long-term issuer credit ratings by two notches to BBB.
