Research Update: TE Connectivity Plc 'A-' Rating Affirmed With Sufficient Headroom To Acquire Richards Manufacturing; Outlook Stable

TE Connectivity Plc (TE) recently announced its agreement to acquire Richards Manufacturing Co. (not rated), a provider of electrical and gas utility grid products, for $2.3 billion in a bid to strengthen its product portfolio for the U.S. energy end-market. We expect the transaction to close in the third quarter of fiscal 2025 (ending Sept. 26, 2025) and be financed with cash on the balance sheet and incremental debt. While the target company should be slightly accretive to TE's EBITDA margins, we estimate pro forma closing leverage at around 1.6x on an S&P Global Ratings' adjusted basis as of Dec. 27, 2024. With EBITDA growth and strong free operating cash flow (FOCF), we expect leverage to decrease toward about 1.3x

...- TE Connectivity Plc (TE) recently announced its agreement to acquire Richards Manufacturing Co. (not rated), a provider of electrical and gas utility grid products, for $2.3 billion in a bid to strengthen its product portfolio for the U.S. energy end-market. We expect the transaction to close in the third quarter of fiscal 2025 (ending Sept. 26, 2025) and be financed with cash on the balance sheet and incremental debt. - While the target company should be slightly accretive to TE's EBITDA margins, we estimate pro forma closing leverage at around 1.6x on an S&P Global Ratings' adjusted basis as of Dec. 27, 2024. With EBITDA growth and strong free operating cash flow (FOCF), we expect leverage to decrease toward about 1.3x in fiscal 2026. - We therefore affirmed our long-term issuer credit rating on TE and the ratings on its senior unsecured notes at 'A-'. We also affirmed our 'A-2' short-term issuer and commercial paper ratings. - The stable outlook reflects our expectation that AI data...

Research Update