ACCO Brands keeps cutting debt, aims for 3x leverage ratio this year

By Devika Patel

Knoxville, Tenn., April 4 – ACCO Brands Corp. plans to keep using free cash flow to pay down debt, since it is still paying down debt from a 2020 acquisition, and intends to get its net debt to EBITDA leverage ratio to 3x from the current ratio of 3.3x by the end of 2022.

In December 2020, the company purchased PowerA, a provider of third-party video gaming controllers, power charging solutions and headsets, for $340 million, plus an additional earnout of up to $55 million cash based upon PowerA meeting certain growth objectives.

“Right now, we’re still paying off debt associated with the PowerA acquisition,” chairman and chief executive officer Boris Elisman said at the Lytham Partners Spring 2022 Investor Conference on Monday.

“We bought all of that with cash and debt.

“We finished last year at a net debt to EBITDA ratio of 3.3x, so we’ve de-levered quite nicely.

“We plan to be below 3x this year,” he said.

The company is financially able to handle another acquisition later this year, but is less likely to do so now, given global political uncertainty and the increased chance of a recession.

“I feel that, by the end of this year or certainly in the second half of this year, we will have capacity to do additional acquisitions,” Elisman said.

“We have close to $600 million on the revolver, so we could certainly do it if we wanted to, but given where we are, given the increased risks of recession and geopolitical risks, the bar for acquisitions is higher than it was.

“Obviously, the cost of borrowing will go up, but given that we’re using debt to fund acquisitions, acquisitions will become more expensive and that means fewer of them will get done,” he said.

The company expects to generate $165 million of free cash flow this year and will use most of it to pay down debt.

“Most of [our expected free cash flow of $165 million] will go towards paying down debt,” Elisman said.

ACCO Brands is a Lake Zurich, Ill.-based supplier of consumer, school, technology and office products.

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