Research Update: Canadian Tire Corp. Affirmed At 'BBB+' On Helly Hansen Acquisition; Outlook Stable

Toronto-based Canadian Tire Corp. Ltd. (CTC) announced it is acquiring Helly Hansen, a Norwegian sportswear apparel maker, for approximately C$1 billion. We expect the company to fund the acquisition primarily with debt and cash. As a result, CTC's pro forma debt leverage will likely increase to about 2.4x at year-end 2018. Given CTC's good cash flow generation and historically conservative financial policies, we expect the company to reduce leverage near the low 2x area within 18-24 months following the acquisition. Therefore, we are affirming all of our ratings on CTC, including our 'BBB+' long-term corporate credit rating on the company. The stable outlook on CTC reflects our expectation that pro forma the Helly Hansen acquisition, adjusted debt-to-EBITDA and funds from

...+ Toronto-based Canadian Tire Corp. Ltd. (CTC) announced it is acquiring Helly Hansen, a Norwegian sportswear apparel maker, for approximately C$1 billion. + We expect the company to fund the acquisition primarily with debt and cash. As a result, CTC's pro forma debt leverage will likely increase to about 2.4x at year-end 2018. + Given CTC's good cash flow generation and historically conservative financial policies, we expect the company to reduce leverage near the low 2x area within 18-24 months following the acquisition. + Therefore, we are affirming all of our ratings on CTC, including our '###+' long-term corporate credit rating on the company. + The stable outlook on CTC reflects our expectation that pro forma the Helly Hansen acquisition, adjusted debt-to-EBITDA and funds from operations-to-debt would improve within 12 months of the acquisition....

Research Update