S&P places Hologic on Credit Watch after news of $18B private equity takeover
S&P Global Ratings recently placed breast imaging vendor Hologic on Credit Watch following news of its acquisition by two private equity firms.
Blackstone and TPG announced their “definitive” agreement to buy the publicly traded company Oct. 21, with plans to take it private in a transaction valued at $18.3 billion. However, S&P analysts are sharing concern Hologic will become hampered with debt after the deal closes.
In its own analysis, Moody’s noted that Blackstone and TPG are financing the transaction with $12.25 billion in debt, spread across three separate loans.
“The CreditWatch placement reflects our expectation that Hologic’s leverage will increase under sponsor ownership, contributing to a weaker overall credit profile,” S&P analysts Ryan Gilmore and Alice Kedem wrote Oct. 22. “While the pro forma capital structure has not been disclosed, we expect leverage under private equity ownership will be elevated relative to Hologic’s current financial risk profile,” they added later.
Hologic did not respond to a Radiology Business request for comment on the ratings action. The deal is still subject to a “go-shop” period, allowing others to swoop in and potentially outbid the two private equity outfits. Hologic said it will not disclose details about these discussions unless an alternative bid is accepted.
Moody’s, meanwhile, is placing the Marlborough, Massachusetts-based imaging system manufacturer on review for a potential downgrade. The agency cited “governance risk considerations” relating to the potential for “more aggressive financial strategies” including a “highly leveraged capital structure.” Private equity firms often saddle their acquired assets with debt, leading to potential financial strain. Previous TPG portfolio companies that have filed for bankruptcy have included orthopedic implant manufacturer Exatech and retailer J. Crew, among others.
“The rating is constrained by Hologic's exposure to general medical utilization trends and hospital capital equipment spending, particularly in the U.S.,” Moody’s experts wrote. “Other constraining factors include pricing pressure from customers, payers’ increased focus on value-based healthcare, and competition from much larger medical products companies.”
Hologic’s core business units focus on the areas of diagnostics, breast health, gynecological surgery and skeletal health. Revenues for the last 12 months ending in June were about $4 billion, the ratings agency noted. Hologic also announced its quarterly earnings on Nov. 3 with revenue of over $1 billion, increasing 6.2%. S&P estimated the company has approximately $1.2 billion in secured term loans due in 2030, which will be repaid when the transaction closes. Following news of the deal, Hologic said it will not provide annual nor quarterly financial guidance for fiscal 2026, and will it not host a conference call to discuss its fourth quarter 2025 financial results.
Numerous regulatory filings with the U.S. Securities and Exchange Commission shed further light on the blockbuster deal. For instance, Hologic has agreed to pay a $540 million termination fee to Blackstone and TPG, if it opts to cancel the deal. Hologic emphasized its sale is not contingent on financing, with the PE firms already acquiring commitments. They also plan to pitch in approximately $2.2 billion of cash and equivalents off the two companies’ balance sheets to fund the 11-figure transaction.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.