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Sealed Air Selling Diversey for $3.2B to Simplify Structure
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Sealed Air Corporation (SEE - Free Report) has inked a $3.2 billion deal to sell its Diversey Care division along with the food hygiene and cleaning business within its Food Care division to Boston-based private equity firm, Bain Capital Private Equity. This divestiture marks a significant milestone in Sealed Air’s transformation and will aid it to focus on profitable growth strategy, including continued investment in core business. The proceeds will be used to pay down debt, buy back shares and fund growth initiatives.
The Diversey business came under the Sealed Air umbrella following its acquisition in 2011 for $4.3 billion. With the acquisition, the company had marked its foray into commercial cleaning and sanitation. Sealed Air which was well known for its Bubble Wrap brand started offering new products like disinfectants and cleaning solutions.
Diversey Care contributed around 29% of Sealed Air’s revenues in 2016. It provides solutions for facility hygiene, food safety and security in food service operations, and infection control to customers globally. It caters to five key institutional and industrial sectors globally namely food service operators, lodging and laundry establishments, facility management and building service contractors, retail outlets as well as healthcare facilities.
In Oct 2016, Sealed Air announced its plan to pursue the tax-free spin-off of Diversey and the food hygiene and cleaning business. Collectively, the business being sold is called “New Diversey”. It would create two independent companies, New Sealed Air consisting of the remaining Sealed Air business, which will be a simpler entity focusing on Food Care, Product Care, and Medical Packaging under the leadership of current CEO, Jerome Peribere.
New Diversey will focus on Diversey Care and Hygiene Solutions with Dr. Ilham Kadri at the helm. It will be a leading hygiene and cleaning solutions company that integrates chemicals, floor care machines, tools and equipment, with a wide range of technology based value-added services, food safety services along with water and energy management. New Diversey will continue to employ approximately 8,600 people worldwide.
The sale is expected to close in the second half of 2017, subject to regulatory approvals as well as customary closing conditions. Diversey’s results will be reported as discontinued operations in Sealed Air’s first-quarter 2017 results, anticipated to be reported on May 9, 2017.
Upon completion of the transaction, Sealed Air will utilize the proceeds to cut down debt levels and maintain net leverage ratio in the range of 3.5 to 4.0 times. It will also repurchase shares to minimize earnings dilution, and fund core growth initiatives, including completing potential complementary acquisitions to its Food Care and Product Care divisions.
Sealed Air's Board of Directors has authorized an increase of the share repurchase program by an additional $1.5 billion of Sealed Air common stock. With this, the total authorization for future repurchases under the program is now pegged at $2.2 billion. The Board has also determined that Sealed Air will maintain quarterly cash dividend of $0.16 per common share.
Sealed Air will continue to focus on accelerating profitable growth and generating strong cash flow through end market opportunities along with the global adoption of new products and solutions. The company’s advanced product portfolio is designed to reduce waste, conserve resources and provide product security. Further, it is expected to deliver unique and measurable value to customers and the planet.
Meanwhile, Sealed Air continues to face weakness in industrial-based businesses which is expected to continue in 2017 as well. Its result will also be impacted by unfavorable foreign currency translation. Sealed Air continues to invest in R&D, sales and marketing. Even though these investments will drive future growth, it will affect margins in the near term.
In the last one year, Sealed Air has underperformed the Zacks classified Containers-Paper/Plastic sub industry with respect to price performance. While the stock dipped 7.6%, the industry recorded growth of 13.9%, in the same time frame.
Sealed Air currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks worth considering in the broader sector include ACCO Brands Corporation (ACCO - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and Brady Corporation (BRC - Free Report) . ACCO Brands has an average positive earnings surprise of 24.74% in the past four quarters and sports a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Parker-Hannifin Corporation has delivered an average positive earnings surprise of 12.44% in the past four quarters and also carries a Zacks Rank #1. Brady Corporation, a Zacks Rank #2 (Buy) stock has an average positive earnings surprise of 20.84% in the same time frame.
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Sealed Air Selling Diversey for $3.2B to Simplify Structure
Sealed Air Corporation (SEE - Free Report) has inked a $3.2 billion deal to sell its Diversey Care division along with the food hygiene and cleaning business within its Food Care division to Boston-based private equity firm, Bain Capital Private Equity. This divestiture marks a significant milestone in Sealed Air’s transformation and will aid it to focus on profitable growth strategy, including continued investment in core business. The proceeds will be used to pay down debt, buy back shares and fund growth initiatives.
The Diversey business came under the Sealed Air umbrella following its acquisition in 2011 for $4.3 billion. With the acquisition, the company had marked its foray into commercial cleaning and sanitation. Sealed Air which was well known for its Bubble Wrap brand started offering new products like disinfectants and cleaning solutions.
Diversey Care contributed around 29% of Sealed Air’s revenues in 2016. It provides solutions for facility hygiene, food safety and security in food service operations, and infection control to customers globally. It caters to five key institutional and industrial sectors globally namely food service operators, lodging and laundry establishments, facility management and building service contractors, retail outlets as well as healthcare facilities.
In Oct 2016, Sealed Air announced its plan to pursue the tax-free spin-off of Diversey and the food hygiene and cleaning business. Collectively, the business being sold is called “New Diversey”. It would create two independent companies, New Sealed Air consisting of the remaining Sealed Air business, which will be a simpler entity focusing on Food Care, Product Care, and Medical Packaging under the leadership of current CEO, Jerome Peribere.
New Diversey will focus on Diversey Care and Hygiene Solutions with Dr. Ilham Kadri at the helm. It will be a leading hygiene and cleaning solutions company that integrates chemicals, floor care machines, tools and equipment, with a wide range of technology based value-added services, food safety services along with water and energy management. New Diversey will continue to employ approximately 8,600 people worldwide.
The sale is expected to close in the second half of 2017, subject to regulatory approvals as well as customary closing conditions. Diversey’s results will be reported as discontinued operations in Sealed Air’s first-quarter 2017 results, anticipated to be reported on May 9, 2017.
Upon completion of the transaction, Sealed Air will utilize the proceeds to cut down debt levels and maintain net leverage ratio in the range of 3.5 to 4.0 times. It will also repurchase shares to minimize earnings dilution, and fund core growth initiatives, including completing potential complementary acquisitions to its Food Care and Product Care divisions.
Sealed Air's Board of Directors has authorized an increase of the share repurchase program by an additional $1.5 billion of Sealed Air common stock. With this, the total authorization for future repurchases under the program is now pegged at $2.2 billion. The Board has also determined that Sealed Air will maintain quarterly cash dividend of $0.16 per common share.
Sealed Air Corporation Price
Sealed Air Corporation Price | Sealed Air Corporation Quote
Sealed Air will continue to focus on accelerating profitable growth and generating strong cash flow through end market opportunities along with the global adoption of new products and solutions. The company’s advanced product portfolio is designed to reduce waste, conserve resources and provide product security. Further, it is expected to deliver unique and measurable value to customers and the planet.
Meanwhile, Sealed Air continues to face weakness in industrial-based businesses which is expected to continue in 2017 as well. Its result will also be impacted by unfavorable foreign currency translation. Sealed Air continues to invest in R&D, sales and marketing. Even though these investments will drive future growth, it will affect margins in the near term.
In the last one year, Sealed Air has underperformed the Zacks classified Containers-Paper/Plastic sub industry with respect to price performance. While the stock dipped 7.6%, the industry recorded growth of 13.9%, in the same time frame.
Sealed Air currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks worth considering in the broader sector include ACCO Brands Corporation (ACCO - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and Brady Corporation (BRC - Free Report) . ACCO Brands has an average positive earnings surprise of 24.74% in the past four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Parker-Hannifin Corporation has delivered an average positive earnings surprise of 12.44% in the past four quarters and also carries a Zacks Rank #1. Brady Corporation, a Zacks Rank #2 (Buy) stock has an average positive earnings surprise of 20.84% in the same time frame.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>