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Elis (ELISGP; Ba1 Pos/BBB-) Confirms offer, limits leverage uplift; follow up

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  • So it's giving indicative commitment to net 2.2x in year 1. We read this as by end of year and assume it is baking in deleveraging and growth in earnings through synergies.
  • The combined entity we see generating EBTIDA of €1.9b and FCF of €500m. 0.26x turns of equivalent firepower on cash generation there and assuming earnings growth from Elis + synergies we add another 0.3x of systematic deleveraging.
  • We conservatively bake in a net 2.8x on acquisition close (company reported which excludes leases) or net 3.1x including.
  • That implies it will take on €2.4b in debt. It has €1.5b coming already with Vestis (not leases so will be included in co's net calculation), leaving €0.9b for issuance.
  • The total shortfall to financing the current equity value of €3.2b would be €2.3b - indicative of significant equity financing.
  • Above calcs we see as bearish end of how much debt may come but we don't have much history tracking communication from this mgmt so please bear that in mind. As we said the most recent large transaction we could find (£2.2b in '17) was debt funded but as we also noted co is in a different position now (at the edge of a IG uplift)).

We pare back some of our earlier bullish views given we are still looking at supply here. It will be at best crossover rated co on close when if it so/then.

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  • So it's giving indicative commitment to net 2.2x in year 1. We read this as by end of year and assume it is baking in deleveraging and growth in earnings through synergies.
  • The combined entity we see generating EBTIDA of €1.9b and FCF of €500m. 0.26x turns of equivalent firepower on cash generation there and assuming earnings growth from Elis + synergies we add another 0.3x of systematic deleveraging.
  • We conservatively bake in a net 2.8x on acquisition close (company reported which excludes leases) or net 3.1x including.
  • That implies it will take on €2.4b in debt. It has €1.5b coming already with Vestis (not leases so will be included in co's net calculation), leaving €0.9b for issuance.
  • The total shortfall to financing the current equity value of €3.2b would be €2.3b - indicative of significant equity financing.
  • Above calcs we see as bearish end of how much debt may come but we don't have much history tracking communication from this mgmt so please bear that in mind. As we said the most recent large transaction we could find (£2.2b in '17) was debt funded but as we also noted co is in a different position now (at the edge of a IG uplift)).

We pare back some of our earlier bullish views given we are still looking at supply here. It will be at best crossover rated co on close when if it so/then.