18th Aug 2021 08:44
(Alliance News) - Moody's late on Tuesday placed NortonLifeLock Inc's credit ratings under review for downgrade over of its planned acquisition of Avast PLC, saying it faces "high execution risks" in the debt-funded deal.
Tempe, Arizona-based cybersecurity software maker NortonLifeLock currently has a corporate family rating of Ba2, two notches off investment grade. It is buying Prague-based peer Avast for about USD8.6 billion in cash and stock. The deal will be financed with USD5.4 billion of debt, excluding the short-term bridge loan.
Moody's expects any downgrade to be limited to one notch.
Execution risks are high "given the transformative nature" of the acquisition, while the targeted synergies are large, the ratings agency said. It estimates NortonLifeLock's debt will be around 5.5 times earnings before interest, tax, depreciation and amortisation when the deal completes in the middle of next year.
While the acquisition will diversify NortonLifeLock's earnings away from North America, its pay model is very different to Avast's 'freemium' model, Moody's noted. Some of the two companies' products are complementary, but many are competitive.
"There will be potential to cross sell LifeLock identity protection products into Avast's customer base for example, but Avast also has its own lower priced BreachGuard service and how and if the products will co-exist has not be disclosed," the agency said.
Shares in Avast were down 0.3% to 599.20 pence in London on Wednesday morning. NortonLifeLock shares rose 0.3% to USD25.96 in New York on Tuesday, and were unchanged in after-hours trading.
By Ivan Edwards; [email protected]
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