Moody’s gave Ansell (ASX:ANN) approval this week following the company’s proposed $641 million acquisition of Kimberley-Clark’s PPE business.
To finance the acquisition, Ansell swiftly raised $400 million, benefiting from a recent scarcity of major fundraisings among highly-rated industrials, with healthy cash flows.
Moody’s considers Ansell's funding structure, comprising 40% equity and 60% debt, as "credit positive," despite acknowledging that many benefits won't materialize until after 2026.
The acquisition is expected to enhance Ansell’s position in the global scientific segment, providing economies of scale and expanding its product portfolio, though most benefits won't be realized until fiscal 2026 onwards.
According to Moody's, the acquired Kimberley-Clark business is a global leader in safety products distribution to scientific and industrial markets.
Ansell anticipates a pro forma fiscal 2023 net debt to EBITDA ratio of 2.3x, rising from a reported 1.2x, but expects it to drop below 2x within a year of the acquisition's completion. Moody’s projects a peak Moody’s-adjusted gross debt/EBITDA ratio near the threshold of 3x for the rating.
With a commitment to a net-debt-to-EBITDA ratio of 1.5x-2.0x, Ansell has consistently maintained net debt/EBITDA below the lower end of its target range for over five years, earning Moody’s confidence in its conservative financial policy.
Ansell’s shares surged from $23.89 on the Friday before the announcement to around $26.65 on Thursday, marking an 11.5% gain.
Moody’s isn’t alone in endorsing the acquisition. Now, Ansell management must ensure the deal is executed and delivers as promised.
