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Elis (ELISGP; Ba1 Pos/BBB-) Moody's comments on potential Vestis acquisition

CONSUMER CYCLICALS
  • Moody's has commented o/n staying on positive outlook - it does not account for a deal yet but it has re-confirmed for us co's initial stated net 2.2x target in first year and 2x in second year after an acquisition.
  • Our assumptions are unch including expecting Moody's to stay on Ba1 through a ~€3.2b acquisition of Vestis.
  • Re. funding assumptions if we assume a upper end 2.8x on close we still see it issuing €0.9b in new debt. A near equal amount (or more contingent on price paid) will be needed to be funded through equities.

Vestis equities remain unconvinced of a deal closing, +7% since the Reuters leak, while Elis equites (-20%) seem unconvinced mgmt will be able to turnaround Vestis performance and unlock synergies to offset co's lower profitability.

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