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Why Should You Buy Energizer Post Spectrum Asset Buyout Plan
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Energizer Holdings Inc. (ENR - Free Report) recently announced its plan to acquire the battery and portable lighting business of Spectrum Brands (SPB - Free Report) . The acquisition will add well-known brands like Rayovac and Varta to Energizer’s product portfolio.
Energizer will pay $2 billion or 7.5 times fiscal 2017 EBITDA for the assets. Spectrum Batteries generated 2017 net sales and EBITDA of $866 million and $169 million, respectively. Almost 45% of the net sales were generated from the Europe, Middle East and Africa (EMEA) markets.
Energizer plans to fund the transaction through a combination of cash and debt (new-term loans and senior notes). Management expects pro-forma leverage ratio of approximately 5.0 times fiscal 2018 adjusted EBITDA.
Energizer exited fiscal 2017 with $378 million in cash and debt of approximately $1.1 billion.
Following the announcement, the company’s shares hit a new 52-week high of $62.86 on Jan 16, 2018, eventually closing lower at $59.11, up 14.5%. Energizer’s shares have returned 21.7% in the past year, compared with the industry’s decline of 6.2%.
The transaction is expected to close prior to the end of calendar 2018.
Acquisition Expands International Presence
Notably, international business represents almost 47% of Energizer’s worldwide net sales and 31% of segment profits. The company expects international business to be a strong contributor to overall growth, driven by robust portfolio and favorable foreign exchange.
Notably, the addition of Varta will boost Energizer’s presence in Europe and Latin America. Post completion of the acquisition, EMEA and Latin America will account for 29% (up from 20%) and 9% (up from 7%) of net sales, respectively.
Moreover, the takeover will expand Energizer’s battery manufacturing footprint, which will help the company ramp up supply.
Accretive Deal to Boost Results
The addition of Spectrum’s assets will definitely boost net sales and EBITDA. Energizer’s footprint will significantly improve in the Hearing Aid market, from 1% to 6%, post the completion of the acquisition. The takeover will also provide more pricing power to Energizer.
The deal is anticipated to be modestly accretive to Energizer’s adjusted earnings per share (EPS) and free cash flow in the first year. Management projects incremental free cash flow of more than $100 million per year, while run-rate synergies are estimated between $80 million and $100 million.
Currently, Energizer projects EPS between $3 and $3.10, representing a mid-single-digit growth rate on a year-over-year basis for fiscal 2018. Moreover, management anticipates low single-digit organic sales growth. Favorable foreign exchange is expected to boost net sales roughly by 1-1.5%.
Long-term earnings growth rate for Ollie's Bargain Outlet Holdings and The Boston Beer Company are currently pegged at 23.46% and 5%, respectively.
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.
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Why Should You Buy Energizer Post Spectrum Asset Buyout Plan
Energizer Holdings Inc. (ENR - Free Report) recently announced its plan to acquire the battery and portable lighting business of Spectrum Brands (SPB - Free Report) . The acquisition will add well-known brands like Rayovac and Varta to Energizer’s product portfolio.
Energizer will pay $2 billion or 7.5 times fiscal 2017 EBITDA for the assets. Spectrum Batteries generated 2017 net sales and EBITDA of $866 million and $169 million, respectively. Almost 45% of the net sales were generated from the Europe, Middle East and Africa (EMEA) markets.
Energizer plans to fund the transaction through a combination of cash and debt (new-term loans and senior notes). Management expects pro-forma leverage ratio of approximately 5.0 times fiscal 2018 adjusted EBITDA.
Energizer exited fiscal 2017 with $378 million in cash and debt of approximately $1.1 billion.
Following the announcement, the company’s shares hit a new 52-week high of $62.86 on Jan 16, 2018, eventually closing lower at $59.11, up 14.5%. Energizer’s shares have returned 21.7% in the past year, compared with the industry’s decline of 6.2%.
The transaction is expected to close prior to the end of calendar 2018.
Acquisition Expands International Presence
Notably, international business represents almost 47% of Energizer’s worldwide net sales and 31% of segment profits. The company expects international business to be a strong contributor to overall growth, driven by robust portfolio and favorable foreign exchange.
Notably, the addition of Varta will boost Energizer’s presence in Europe and Latin America. Post completion of the acquisition, EMEA and Latin America will account for 29% (up from 20%) and 9% (up from 7%) of net sales, respectively.
Moreover, the takeover will expand Energizer’s battery manufacturing footprint, which will help the company ramp up supply.
Accretive Deal to Boost Results
The addition of Spectrum’s assets will definitely boost net sales and EBITDA. Energizer’s footprint will significantly improve in the Hearing Aid market, from 1% to 6%, post the completion of the acquisition. The takeover will also provide more pricing power to Energizer.
The deal is anticipated to be modestly accretive to Energizer’s adjusted earnings per share (EPS) and free cash flow in the first year. Management projects incremental free cash flow of more than $100 million per year, while run-rate synergies are estimated between $80 million and $100 million.
Currently, Energizer projects EPS between $3 and $3.10, representing a mid-single-digit growth rate on a year-over-year basis for fiscal 2018. Moreover, management anticipates low single-digit organic sales growth. Favorable foreign exchange is expected to boost net sales roughly by 1-1.5%.
Zacks Rank & Other Stocks to Consider
Energizer carries a Zacks Rank #2 (Buy).
Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and The Boston Beer Company, Inc. (SAM - Free Report) are two stocks worth considering in the broader Consumer Staples sector. The companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Ollie's Bargain Outlet Holdings and The Boston Beer Company are currently pegged at 23.46% and 5%, respectively.
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 >>