BTG acquisition

Voith has announced the signing of an agreement with Spectris plc to acquire BTG for a total gross cash consideration of EUR 319m. The transaction is expected to close late in the fourth quarter of 2019. Scope has been expecting acquisition activity based on Voith’s high liquidity position following the sale of KUKA shares in 2016.

According to Voith, the strategic rationale behind the BTG acquisition is to complement its existing portfolio and strengthen its competitive position as a full-line supplier for the paper industry in the areas of consumables, services and software. BTG provides specialised measuring instruments, software and services mainly in the areas of packaging, graphic papers and tissue.

Scope expects some synergies, in particular due to administrative cost savings, although the exact amount is difficult to quantify at present. Voith plans to finance this transaction from available liquidity sources. Scope understands that no additional debt will be assumed.

Rating implications

The transaction does not affect Voith’s business risk profile due to the relatively small size of BTG. According to the press, BTG employs around 580 professionals across the world; the book value of its gross assets amounted to GBP 140.3m as at 30 June 2019, and the adjusted EBITDA generated for the year ended 31 December 2018 was GBP 24.5m.

In its rating case, Scope anticipated acquisition activity of up to EUR 500m. The announced acquisition is within this range and therefore has no effect on the rating. While Scope expects net leverage to increase to more than 2.0x (FY-end 2018: 1.7x) following this transaction, it should still remain in the 2.0-3.0x range, which is within the range for the current rating.

Scope continues to view Voith’s liquidity position as very sound. Scope’s expectation is that liquid assets (cash on balance and marketable securities) will be around EUR 850m at end-September 2019 (EUR 960m at end-September 2018).

This publication does not constitute a credit rating action. For the official credit rating action release click here. On 18 January 2019, Scope assigned Voith GmbH & co. KGaA an issuer rating of BBB. The short-term rating is S-2. The Outlook is Stable.