S&P puts Rockwell Automation on watch

S&P said it placed its long-term A issuer credit rating on Rockwell Automation Inc. on CreditWatch with negative implications.

The placement follows Rockwell reporting it agreed to acquire Plex Systems Inc. for about $2.2 billion, the agency noted.

“We expect the Rockwell to finance the acquisition with cash on hand and incremental debt, which will considerably increase our adjusted debt leverage for the company. Specifically, we forecast that Rockwell's net debt could increase by the amount of the acquisition price (about $2.2 billion), with Plex initially contributing only about $150 million of revenues (based on its 2020 figures). This represents a substantial acquisition multiple, and Rockwell will rely heavily on its current cash flow generation capabilities and financial policy to reduce its leverage back below 2x,” S&P said in a press release.

The agency aims to resolve the CreditWatch before the deal closes. “The CreditWatch reflects the potential that we will lower our ratings on Rockwell by one notch if we believe its debt leverage will remain above 2x beyond the 24 months following the close of the acquisition,” S&P said.

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