Fitch Ratings has affirmed its Long-Term Issuer Default Ratings (IDRs) for nVent Electric plc and nVent Finance SARL (collectively NVT) at 'BBB' and the company's senior unsecured debt rating at 'BBB'.

The Rating Outlook is Stable.

The Stable Outlook reflects Fitch's expectation that NVT will prioritize deleveraging following the acquisition of ECM Investors, LLC, the parent company of ECM Industries, LLC (collectively ECM), including repaying a portion of the debt within the next 12 to 24 months, successful integration of ECM and the company managing its EBITDA leverage below 2.5x by 2024. The rating considers NVT's strong FCF generation and positive secular trends that are expected to fuel medium-term growth.

Key Rating Drivers

Greater Breadth in Electrical & Fastening: NVT plans to acquire ECM for $1.1 billion, subject to customary adjustments, funded through a combination of available cash and new debt. ECM is a manufacturer of electrical connectors, tools & test instruments, and wire management solutions for mission critical applications. Fitch is forecasting the acquisition of ECM will help NVT's Electrical and Fastening Solutions segment's sales reach $1.2 billion in 2024, representing 35% of forecasted sales, from $791 million in 2022.

ECM would add brands like Ilsco, Gardner Bender and King Innovation to NVT's portfolio while adding a diverse customer base and broadening NVT's retail presence. The complementary product mix and cross selling opportunities could also present possible revenue synergies. According to NVT, the ECM acquisition will be margin accretive and is expected to yield $16 million in cost synergies by 2025 on an annual basis.

Deleverage Post Acquisition: According to management, the company will actively manage to its net leverage target of 2.0x-2.5x EBITDA and use its FCF to pay down debt in the near term, with net leverage falling to its target range by the end of 2024. Over the past five years, NVT's EBITDA leverage has generally been in the low-2.0x range, varying from 1.9x to 2.4x with the 2.4x recorded during 2020 due to the impact of pandemic.

Fitch believes NVT has sufficient deleveraging capacity with FCF projected to range from about $240 million to about $360 million over the forecast period. Fitch forecasts EBITDA leverage to reach 2.9x in 2023 but to then decline to 2.2x in 2024, below our negative sensitivity, as the ECM acquisition contributes a full year of earnings and NVT repays a portion of the new debt over the next 12 to 24 months following the acquisition. Fitch has not factored in the potential cost or revenue synergies into our forecasts given the execution risk in the near term.

Record of Cash Flow Generation: NVT has generated strong FCF over the last several years, with post-dividend FCF margins ranging from 8% to 9% over the last four years, including an 8% margin in 2022. Fitch expects this trend to continue, with FCF of around 8% or greater of annual revenue through the medium term. High FCF is supported by effective working capital management and relatively low capital intensity, which should allow the company to maintain adequate financial flexibility through economic cycles.

Positive Tailwinds: Fitch expects continued medium-term growth across NVT's business segments driven by structural trends such as sustainability, electrification of everything, and digitalization, complemented by tuck-in acquisitions. Fitch views the company's relatively high exposure to industrial (42% of 2022 sales) and limited exposure to residential (

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