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Investing.com -- Moody’s Ratings has downgraded Akzo Nobel N.V.’s senior unsecured ratings to Baa3 from Baa2, while changing the outlook to stable from negative.
The rating action follows AkzoNobel’s November 18 announcement that it plans to merge with Axalta Coating Systems Ltd. in an all-stock transaction. Under the agreement, AkzoNobel shareholders will own 55% of the combined entity, while Axalta shareholders will hold 45%.
Prior to the transaction closing, which is expected in late 2026 or early 2027, AkzoNobel shareholders will receive a total dividend payout of €2.5 billion, consisting of the company’s regular dividend plus a special dividend. The company has also cancelled a previously announced €400 million share buyback program.
Moody’s cited high starting leverage of the combined entity as the primary reason for the downgrade. The rating agency expects AkzoNobel will need to fund a substantial portion of the dividend payout with additional debt, resulting in a 2025 proforma Moody’s-adjusted gross debt/EBITDA ratio of 4.6x.
The stable outlook reflects Moody’s expectation that the company will present a plan to reduce debt to levels appropriate for its rating after the merger closes. The combined entity has committed to maintaining an investment grade rating and achieving a net leverage ratio between 2.0x and 2.5x.
The merger’s success partly depends on realizing ambitious synergy targets of €600 million, with the companies expecting to achieve 90% of these synergies within three years after closing. These synergies would be in addition to ongoing cost reduction efforts at both companies.
Moody’s also downgraded AkzoNobel’s commercial paper program and other short-term ratings to P-3 and (P)P-3 from P-2 and (P)P-2 respectively.
The transaction remains subject to shareholder approval from both companies as well as regulatory and antitrust clearances.
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