Fitch: No Rating Impact on Deutsche Post from UK Mail Acquisition
The acquisition consideration of about GBP243m for the entire issued share capital of UK Mail represents about 11% of DP's outstanding net debt at end-2015 of EUR2,652m as adjusted by Fitch. The consideration agreed by DP values UK Mail at an EBITDA multiple of about 12x for 2016.
The acquisition of UK Mail is more than offset in Fitch's forecasts by the additional EUR378m cash inflow from the release in early 3Q16 of collateral posted against a legal dispute with the EU relating to state aid. DP had unrestricted cash of EUR2,526m at end-2015. Fitch forecasts DP's funds from operations (FFO) adjusted net leverage unchanged at around 3.3x at end-2016 proforma for the UK Mail acquisition and cash from the state aid dispute. This forecast includes an increase in net debt to close to EUR5bn by end-2016 due to the issue of EUR1.25bn of unsecured notes to fund the group's pension deficit and the EUR1bn share buyback announced in 2016.
UK Mail is an integrated mail and parcel operator in the UK. The acquisition would add to DP's DHL Parcel business capabilities in the UK; DP is also investing heavily in UK hubs at London Heathrow and East Midlands airport. UK Mail recently commissioned a new automated hub which should limit further capex needed by DP to integrate the UK Mail business. Although marginally increased, we do not view DP's exposure to the UK, considering the Brexit vote, as a rating constraint. Parcels business is a major growth area for DP where volumes have been growing in high single digits for many years driven by growth in e-commerce.