Moody’s and S&P Global Ratings have maintained their credit ratings for GXO (NYSE: GXO), with Moody’s Ba1 rating one notch below investment grade and S&P Global’s BBB- rating as the lowest investment-grade rating. Both agencies have placed GXO on a watch list due to the additional debt the company will take on for the Wincanton acquisition. This has resulted in a negative outlook from S&P and a credit-negative declaration from Moody’s.
Despite these concerns, Moody’s still holds a positive outlook for GXO, indicating a potential increase in its rating in the future. The acquisition of Wincanton has been recommended by the Wincanton board, rejecting a previous offer from Ceva Logistics.
The ratings agencies’ hesitations are based on the resulting credit metrics rather than the strategic value of the acquisition. S&P believes that Wincanton will enhance GXO’s market presence in the U.K., while Moody’s emphasizes the potential synergies and expansion opportunities that the deal brings.
While the acquisition will increase GXO’s debt levels, Moody’s believes the company can leverage its free cash flow to reduce its debt over time. S&P predicts a short-term drop in margins but expects cost synergies to improve profitability in the long run.
Despite the concerns raised by the ratings agencies, GXO remains optimistic about the long-term benefits of the Wincanton acquisition. The company’s management is confident in their ability to realize synergies and enhance their market position, despite the temporary increase in debt levels. GXO’s willingness to restore its credit measures will be closely monitored by S&P.
Overall, the acquisition of Wincanton is expected to have a significant impact on GXO’s financials, but the company remains optimistic about its long-term prospects.
