Research Update: Global IT Service Provider Capgemini Downgraded To 'BBB' On Acquisition Of Altran; Outlook Stable

Capgemini obtained clearance from the Paris Court of Appeals to proceed with its acquisition of France-based engineering and research and development provider Altran Technologies SE for a total cash consideration of €3.7 billion and €1.7 billion of gross financial debt. We expect the combined group's pro-forma adjusted debt to EBITDA will weaken to about 3.6x in 2020 before falling to 3.0x or below in the following years, assuming Capgemini eventually purchases 100%. If ownership remains at the current 55% level, average leverage is over half a turn lower. We are therefore lowering our ratings on Capgemini to 'BBB' from 'BBB+', and removing them from CreditWatch with negative implications. The stable outlook reflects our view that Capgemini's solid balance sheet and

...- Capgemini obtained clearance from the Paris Court of Appeals to proceed with its acquisition of France-based engineering and research and development provider Altran Technologies SE for a total cash consideration of 3.7 billion and 1.7 billion of gross financial debt. - We expect the combined group's pro-forma adjusted debt to EBITDA will weaken to about 3.6x in 2020 before falling to 3.0x or below in the following years, assuming Capgemini eventually purchases 100%. If ownership remains at the current 55% level, average leverage is over half a turn lower. - We are therefore lowering our ratings on Capgemini to '###' from '###+', and removing them from CreditWatch with negative implications. - The stable outlook reflects our view that Capgemini's solid balance sheet and liquidity and cash flow generation will allow it to manage the Altran acquisition and deleverage, despite ongoing market and economic turbulence....

Research Update