NEW YORK (TheStreet) -- P&G (PG) - Get Procter & Gamble Company Report will buy Israeli medical devices firm ConTipi for as much as $100 million, according to reports, as Moody's warned of elevated rating downgrade risks in the food and consumer products sectors.
ConTipi develops disposable inserts to prevent urinary incontinence in women. It's anticipated that ConTipi will start marketing them next year.
The report came from Reuters, which cited Israeli daily Maariv. According to the reports, P&G will pay $50 million initially, then an additional $50 million depending on whether certain milestones are reached. They also said that ConTipi signed a cooperation agreement with P&G three years ago.
ConTipi officials were silent about the reported deal, the reports said.
The acquisition reports were published as Moody's said in a report released Wednesday evening that many investment-grade consumer product companies are currently in strong financial condition -- after focusing on shoring up liquidity during the economic downturn -- to make strategic deals and "ramp up payments to shareholders."
These kinds of special events, historically, have led to ratings downgrades in the sector, Moody's warned. During the past 15 years, there have been 53 rating downgrades in the consumer-products sector -- specifically related to special events.
Most have been one-notch downgrades associated with mergers and stock buybacks. But there have been some significant downgrades such as the six-notch downgrade of Kellogg (K) - Get Kellogg Company Report when it acquired Keebler in 2001, Moody's wrote.
Against this backdrop, Moody's assessed the capacity of certain consumer products companies that historically have been active in acquisitions or that may have strategic reasons for making an acquisition to increase leverage within current ratings.
The analysis listed Alberto-Culver (ACV) - Get AllianzGI Diversified Income & Convertible Fund Report , Jarden (JAH) and Hillenbrand (HI) - Get Hillenbrand, Inc. Report as companies with the most capacity to assume additional debt through mergers and acquisitions within current rating categories while Fortune Brands( FO) , Mead Johnson Nutrition (MJN) and Constellation Brands (STZ) - Get Constellation Brands, Inc. Class A Report are among those with the least capacity to do so within current rating categories.
Furthermore, the report identified Leggett & Platt (LEG) - Get Leggett & Platt, Incorporated Report , Sara Lee( SLE) and Kimberly-Clark (KMB) - Get Kimberly-Clark Corporation Report as companies with the most capacity to assume additional debt through shareholder payouts within current rating categories. Avon Products (AVP) - Get Avon Products, Inc. Report and Procter & Gamble were identified as having the least capacity.
Moody's noted that increased financial flexibility alone does not ensure that a company will make an acquisition or boost shareholder payouts.
-- Written by Andrea Tse in New York.
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