18th Aug 2021 21:21
(Alliance News) - Moody's Investors Service on Wednesday placed Prague-based cybersecurity firm Avast PLC's Ba1 credit rating under review for a downgrade over its planned takeover by US rival NortonLifeLock Inc.
Tempe, Arizona-based NortonLifeLock is buying 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.
The credit agency said that the review would focus on the financial arrangements following the transaction as well as its successful closing, including the necessary regulatory approvals.
Late Tuesday, Moody's had placed NortonLifeLock's Ba2 rating under review for a downgrade, giving the reason that 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.
Shares in Avast closed 1.1% lower at 594.34 pence on Wednesday in London, while NortonLifeLock's shares were 0.9% lower at USD25.73 in New York.
By Dayo Laniyan; [email protected]
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