Moody’s might lower Multi-Color

Moody's Investors Service said it placed Multi-Color Corp.’s Ba3 corporate family rating, Ba3-PD probability of default rating and B2 rating on the senior unsecured notes under review for downgrade.

The review follows the company’s announcement of entering into a definitive agreement to acquire the Labels Division of Constantia Flexibles (Constantia Labels) from Constantia Flexibles Holding GmbH (B1 stable)) in a cash and stock transaction.

The transaction purchase price is about $1.3 billion (€1.15 billion), and will be settled in cash and 3.4 million shares in Multi-Color stock (representing 19.9% of current stock outstanding).

Moody’s said the review for downgrade reflects pro forma leverage that breeches the downgrade trigger, the size and scope of the acquisition, and the inherent operating and integration risk.

Pro forma leverage is projected to be over 5 times for the last 12 months ending March 31, 2017.

The acquisition will increase revenue over 75% as well as significantly increase revenue from outside the United States, the agency noted.

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