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S&P, Moody's put Diplomat Pharmacy's ratings on review after UnitedHealth bid

S&P Global Ratings placed Diplomat Pharmacy Inc.'s ratings on CreditWatch positive, while Moody's placed its ratings under review for an upgrade following the company's agreement to merge with UnitedHealth Group Inc.'s OptumRx Inc.

Flint, Mich.-based Diplomat Pharmacy agreed to the health insurer's bid to acquire its outstanding common stock for $4.00 per share along with the assumption of outstanding debt.

Diplomat Pharmacy's B- issuer credit rating was among those put on CreditWatch with positive implications by S&P Global Ratings.

Ratings said the CreditWatch placement reflects the impact of the acquisition by UnitedHealth, which has an A+ issuer credit rating last reviewed by the agency on July 23.

Ratings added that it will resolve the CreditWatch after the transaction is completed, which is expected in early 2020, subject to regulatory approvals and other conditions.

Meanwhile, Moody's placed the company's Caa1 corporate family rating and the Caa1 senior secured rating for an upgrade. The rating agency has also revised the outlook on the ratings to "rating under review" from "developing."

Moody's said it will examine the benefits of Diplomat Pharmacy becoming part of a larger, higher-rated organization, as well as the treatment of the company's debt in Minnetonka, Minn.-based UnitedHealth's capital structure.

Moody's expects Diplomat Pharmacy's debt-to-EBITDA ratio to rise to over 7x by the end of 2019, citing "a declining earnings trajectory." The specialty pharmacy and infusion services provider's revenue for the third quarter of 2019 declined to $1.30 billion from $1.37 billion in the prior-year period.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.