Moody's lowers EnerSys to negative

Moody's Investors Service said it affirmed EnerSys's Ba1 corporate family rating, Ba1-PD probability of default rating, Ba2 senior unsecured notes rating and the SGL-1 speculative grade liquidity rating following news that the company plans to purchase Alpha Technologies Group of Cos.

The outlook also was revised to negative from stable.

On Oct. 29, EnerSys announced that it has entered in to an agreement to purchase Alpha Technologies for about $750 million, Moody's explained.

The company expects to fund the acquisition through $500 million in increased borrowings under its senior secured credit facilities, including $200 million under its revolving facility and $300 million of incremental term loan, as well as from use of cash reserves, the agency said.

The transaction is expected to close before Jan. 30, 2019, Moody's noted.

The outlook revision reflects a view of high integration risk, along with increased financial leverage that will ensue from the proposed acquisition of Alpha, the agency said.

The acquisition is by far the company's largest in recent years, equating to about twice the cumulative acquisition spending in the last 15 years and more than six times the size of its largest acquisition, Purcell Systems, Inc. in 2014, Moody's said.

Although EnerSys has a good history of integrating smaller acquisitions, the agency said it believes that the Alpha integration may involve more complexity than prior purchases due to the size and additional scope of product offerings that Alpha entails.

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