S&P affirms Entegris on merger news

S&P said it affirmed all of the ratings on Entegris Inc., including its BB+ issuer credit rating.

The affirmation follows news that Entegris will merge with Versum Materials Inc. in an all-stock transaction representing a $9 billion merger of equals.

Entegris expects to assume $987 million of Versum's outstanding debt into its existing capital structure, which consists of a $562 million term loan and $425 million of outstanding bonds.

This transaction will increase the company's funded debt balance to about $1.9 billion, S&P said.

The outlook is stable, reflecting an expectation that the company will successfully integrate the Versum business and improve its adjusted EBITDA margins to the 30% range, the agency said.

S&P said it expects the company's annual free cash flow to exceed $450 million and net leverage to remain in the 1x range over the next 12 months.

Entegris and Versum both operate within the semiconductor process materials space with few stand-alone competitors, the agency said, and compete primarily against business units within substantially larger global diversified chemical firms.

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