Elis (ELISGP; Ba1 Pos/BBB-) Does a "non-deal investor roadshow"

In prompt reaction to market concerns co did a roadshow this morning - likely focused for equity holders (-18% since Friday) but included reaffirmation of holding onto IG ratings and net 2x by year two of a transaction. Interestingly it's removed the net 2.2x by year 1 target it had on Friday's presser...it gives it more runway to delever from the amount of debt it initially takes on; we currently have €900m of supply on net 2.8x at close - we will circle back if we change those assumptions. € Elis lines are -3-4bps tighter this morning - hard for us to call secondary cheap when supply overhang remains - double digit NIC's should be on offer if it does. For those not keen to wait the €28s at Z+123 look widest on curve.

• It is quiet clear it wants to enter US market and preferably using a national player like Vestis (vs. slower approach of bolt-on acquisitions). It's flagged 3 other national players; Cintas (CTAS), UniFirst (UNF) and Private Alsco. It says NA is 2x larger than the addressable European market.
• Most of Q&A was on Vestis margin's (EBIT 5-7% vs. Elis's 11-13%). All it said was it has a good idea of why margins were weak but refrained from any detail. It also noted GAAP vs. IFRS differences should move that tad higher. The leverage targets will be over IFRS adj. EBITDA numbers.
• We were right in saying the 2017 Berendsen deal (£2.2b) was the last major one - it used it as a case study to prove it can reap synergies and noted it was more complex given the target operated across many countries (vs. Vestis only US).
• A correction we said Berendsen was financed through mainly debt. Final offer was actually £5.40/share in cash and 0.403 Elis shares (~£7.1/share) - hence even then bulk of it came in equity financing. Despite the cash component only being £900m it still tapped €1.7b in bridge loans - hence our mix up...not sure why it overfunded.

Vestis has also responded this morning with a boilerplate presser that a "preliminary inquiry" was made from Elis. No other value-add info there. Reminder it was Reuters that first leaked this on Friday morning. It's equities remain unconvinced of a close; +2% in pre-market and +8% from pre-rumour levels.