France’s Arkema credit rating outlook upgraded on post-Bostik deleveraging – Moody’s

LONDON (ICIS)–Moody’s has upgraded its credit rating outlook for France-based specialty chemicals major Arkema from stable to positive on the back of successful deleveraging since its acquisition of adhesives firm Bostik in 2015 and an improved product portfolio, the US credit rating agency said on Thursday.

Arkema acquired Bostik in a deal valuing the producer at €1.74bn, an 11 times multiple on its earnings before interest, taxes, depreciation and amortisation (EBITDA), which it financed in part with a series of bond issues, rights issues and capital increases.

The acquisition, which Arkema used as the centrepiece of its adhesives division, raised company leverage to 2.9 times EBITDA.

However, the multiple has been reduced to 2.2 times, or 1.3 times on a net basis factoring in estimated cash reserves of €1.3bn, Moody’s said.

The company increased the share of revenues derived from specialty chemicals from 60% five years ago to 70%, with scope to increase that to 80% on the back of its current strategy of making bolt-on acquisitions in the adhesives sector, a space CEO Thierry Le Henaff describes as fragmented.

“We believe that Arkema continues with its so far prudent execution of bolt-on and mid-sized acquisitions in order to reach its goal to become a €10bn company with a close to 17% EBITDA margin by 2020, whilst moving leverage levels to towards 2.0x [times] debt/EBITDA,” said Moody’s vice president and analyst Martin Kohlhase.