Research Update: Clariant AG Outlook Revised To Stable On Proposed Acquisition Of Lucas Meyer Cosmetics; 'BBB-/A-3' Ratings Affirmed

Switzerland-based specialty chemical producer Clariant AG announced it has proposed to acquire Canada-based Lucas Meyer Cosmetics for $810 million (roughly Swiss franc 720 million). We expect the company to fund the acquisition through a combination of new debt and cash. Pro forma the proposed acquisition financing, and including a full year of EBITDA from Lucas Meyer Cosmetics in 2024, we expect Clariant's S&P Global Ratings-adjusted funds from operations (FFO) to debt will decrease to below 30% at year-end 2024. This is lower than our previous forecast of 45%-50%. We therefore no longer view the possibility of a higher rating as likely over the next 12-24 months. As a result, we revised our outlook on the 'BBB-' long-term issuer credit rating

... Clariant AG announced it has proposed to acquire Canada-based Lucas Meyer Cosmetics for $810 million (roughly Swiss franc 720 million). - We expect the company to fund the acquisition through a combination of new debt and cash. - Pro forma the proposed acquisition financing, and including a full year of EBITDA from Lucas Meyer Cosmetics in 2024, we expect Clariant's S&P Global Ratings-adjusted funds from operations (FFO) to debt will decrease to below 30% at year-end 2024. This is lower than our previous forecast of 45%-50%. We therefore no longer view the possibility of a higher rating as likely over the next 12-24 months. - As a result, we revised our outlook on the '###-' long-term issuer credit rating on Clariant to stable from positive. At the same time, we affirmed the '###-' long-term and 'A-3' short-term ratings on the company and the '###-' issue rating on its debt. - The stable outlook indicates that pro forma the transaction, Clariant...

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