Fitch to assign ACCO loans BB+

Fitch Ratings said ACCO Brands Corp.’s announcement that it will acquire Esselte Group Holdings AB is neutral to the company's long-term issuer default rating of BB.

At $60 million in EBITDA, the $333 million purchase price implies a 5.5 times enterprise value (EV)/EBITDA multiple.

The company plans to fund the acquisition with a new euro-denominated term loan and Fitch expects the acquisition, together with the company's $78 million term loan paydown in third quarter 2016, would have minimal impact on the company's current leverage of around 3 times.

In addition, the agency said it expects to rate ACCO's new €300 million term loan A and A$80 million term loan A BB+/RR1/stable.

The proposed Esselte acquisition would improve ACCO's geographical diversification (ACCO is primarily exposed to the U.S.) and provide synergy opportunities in duplicative costs (up to $23 million per management guidance), as well as some potential revenue synergies through cross-marketing the expanded product portfolio to the combined entity's sales teams.

However, Fitch said, while the acquisition diversifies ACCO's geographic profile, the exposure to the challenged office products industry will not change significantly.

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