Moody’s reviews Novalis

Moody's Investors Service said it placed under review with direction uncertain the Ba2 corporate family rating and the Ba2-PD probability of default rating of Elis SA and the Ba2 instrument rating on Novalis SAS’ €800 million senior notes due 2022.

The action follows Elis' announcement on May 18 that it has made a public proposal to acquire Berendsen plc after the company's two previous private proposals were rejected by the board of directors of the target. The public proposal implies a total equity value for Berendsen of about £2.05 billion, or a total consideration of about £2.5 billion including the target's net debt of £428 million as of Dec. 31. Elis is currently proposing to fund the acquisition with new Elis shares and cash raised from committed new debt financing accounting for about 48% of the total cash consideration.

The agency said the review reflects the positive contribution of Berendsen to Elis' business profile, the potential revenue and cost synergies that can be generated from the combination of the two businesses and the relatively high equity contribution (52%) to the acquisition funding mix leading to a relatively modest impact on Elis' pro forma leverage.

However, Moody’s believes these positive factors are counterbalanced by the uncertainty regarding the final consideration that might be agreed, including a potential higher level of debt funded consideration that in turn could have a negative impact on Elis' pro forma leverage ratio.

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