Moody's Investors Service said Tuesday it assigned a B2 corporate family rating to Merge Healthcare Inc. with a stable outlook, reflecting the risks of its proposed acquisition of Amicas Inc.

The B2 rating, five notches below investment grade, also apply to Merge's $200 million senior notes offering and its probability of default rating.

Proceeds from the notes are to help pay for Merge's $248 million acquisition of Amicas, a medical imaging software company.

Moody's said Merge's small scale, integration risk, and risk that it could continue to pursue growth through acquisitions are behind the rating.

"We believe, however, that if the Amicas acquisition is well-executed, there could be substantial opportunity for cost synergies," Moody's said.

Moody's said it expects the combined company to generate strong free cash flow relative to its debt in 2011 and beyond.

But it added the combined company will be a "relatively niche player" in an industry dominated by large imaging equipment vendors and information technology solutions providers. The entity is also highly reliant on the radiology industry, which faces revenue cuts and regulatory scrutiny.

Moody's also assigned a speculative grade liquidity rating of SGL-3, saying the combined company will have adequate cash over the next year thanks to the $35 million to $40 million that it will receive following the acquisition's close.

The new company, however, lacks a revolving credit facility that could lead to the depletion of its cash reserves and cause a ratings downgrade or negative outlook.