S&P: FKI on watch

Standard & Poor's said it placed its long-term BB ratings on FKI plc on CreditWatch with negative implications, reflecting a continued weak performance and the possible adverse financial impact of a takeover by Melrose plc (not rated), which has expressed interest in acquiring FKI.

At the same time, the B short-term ratings on FKI were affirmed, the agency said, noting that the outcome of Melrose's approach to FKI remains uncertain.

If a takeover takes place, the resulting entity could have a financial profile that is too weak for a BB rating, assuming that a considerable share of the proposed £412 million offer will be debt financed, S&P said, adding that the ratings on FKI reflect strong competition while they also reflect the group's weakening pricing power, exposure to cyclical end markets and leveraged financial structure.

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