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CHICAGO--([ BUSINESS WIRE ])--The ratings and Stable Outlook for Agilent Technologies, Inc. (Agilent) (NYSE: A) are unaffected by the company's proposed acquisition of Dako, according to Fitch Ratings.

Agilent today announced it had reached a definitive agreement with the private equity group, EQT, to acquire Dako for $2.2 billion, representing Agilent's largest acquisition to date. Agilent will fund the deal with off shore cash, which represents most of the company's approximately $3.9 billion of total cash and cash equivalents at the quarter ended April 30, 2012. In addition, the significant majority of Agilent's free cash flow (FCF), which Fitch expects to range from $500 million to $1 billion annually, is generated overseas.

Dako is a leading provider of cancer diagnostics tools and is expected to meaningfully strengthen Agilent's product presence and customer reach in these markets. In addition, Fitch believes the acquisition will accelerate Agilent's revenue growth and should help create greater balance in Agilent's revenue portfolio.

Agilent will report Dako as a separate segment and expects $373 million of revenues for fiscal 2013 with an 18% operating profit margin, which Fitch estimates is comparable to corporate wide operating margin. Agilent believes the deal increases recurring revenues to approximately 30% from 25%, given more than 90% of Dako's revenues are from reagents and services.

Agilent will acquire Dako with no debt or cash and expects the transaction will close within the next 60 days, subject to the satisfaction of customary closing conditions.

The ratings continue to be supported by:
--Leading positions in faster growing and more stable life sciences and chemical analysis markets.
--Global footprint and substantial end market, customer, and technology platform diversification.
--Conservative financial policies with sufficient overall liquidity, as well as solid and growing annual FCF.

Ratings concerns include:
--Mature growth rates and trends toward reduced testing within certain electronic measurement markets.
--Substantial R&D requirements to maintain technology leadership.
--Potential for higher debt levels over time due to anticipated overseas cash build.

Fitch believes positive rating actions could result from stronger annual free cash flow through the cycle, likely the result of market share consolidation and volume and restructuring driven operating profitability expansion.

Negative rating actions could occur if:
--Organic revenue growth or operating margins are meaningfully below targeted levels for a sustained period, suggesting a potential loss of technology leadership, the faster than anticipated commoditization of markets, or less robust growth within developing economies.
--Share buybacks and acquisitions meaningfully exceed annual free cash flow, which likely will require incremental borrowing due to significant cash levels overseas.

Fitch affirmed the ratings and Stable Rating Outlook on April 16, 2012. Fitch currently rates Agilent as follows:

--Issuer Default Rating (IDR)'BBB+';
--Senior unsecured revolving credit facility (RCF) 'BBB+';
--Senior unsecured notes 'BBB+'.

Additional information is available at [ www.fitchratings.com ].

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Nov. 24, 2009);
--'Evaluating Corporate Governance' (Dec. 12, 2007);
--'Liquidity Considerations for Corporate Issuers' (June 12, 2007);
--'Cash Flow Measures in Corporate Analysis - Amended' (Oct. 12, 2005).

Applicable Criteria and Related Research:
Corporate Rating Methodology
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229 ]
Evaluating Corporate Governance
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657143 ]
Liquidity Considerations for Corporate Issuers
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666 ]
Cash Flow Measures in Corporate Analysis
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=243758 ]

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