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Spectrum Brands to Sell Global Auto Care Business, Stock Down
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Spectrum Brands Holdings, Inc. (SPB - Free Report) has agreed to sell Global Auto Care (“GAC”) Business to Energizer Holdings (ENR - Free Report) for $1.25 billion in cash and equity. Concurrently, Spectrum Brands also signed an amended agreement for the previously announced sale of Global Batteries & Lighting businesses to Energizer Holdings for $2 billion cash. However, it will retain the Appliances business.
As a result, the company reclassified its Appliances business as continuing operations, comprising the Personal Care and Small Appliances businesses, effective the first quarter of fiscal 2019.
Notably, the sale proceeds from the GAC business will include $937.5 million of cash and $312.5 million of Energizer Holdings’ equity. The transaction, anticipated to close in the second quarter of fiscal 2019, is subjected to fulfilling of customary closing conditions and regulatory approvals. The GAC business mainly includes appearance product category, performance product category and A/C recharge product category. Per Spectrum Brands, this business aptly fits in Energizer’s existing auto care business portfolio. It notes that Energizer has the skills and resources to further expand this business.
Net sales at the GAC segment totaled $175.2 million (up 12.5%), contributing nearly 18.5% to the company’s total sales of $945.5 million in third-quarter fiscal 2018. Organic net sales for GAC grew 12%. Further, the division recorded adjusted EBITDA of $50.1 million, while the company’s overall adjusted EBITDA was $206.4 million.
Coming to the deal related to the Global Batteries & Lighting businesses, the amended agreement is a remedial measure for the consideration of the European Commission (EC). This amendment includes a clause for the potential downward revision of the bid price up to a maximum of $200 million. The company expects to close the deal latest by the start of calendar year 2019, subject to EC’s nod.
Following the news, shares of Spectrum Brands decreased more than 9%. Further, this Zacks Rank #4 (Sell) stock has lost 35% in the past three months, compared with the industry’s 9.8% decline. This underperformance can be mainly attributed to adverse impacts of the rising commodity and freight costs industry-wide and higher operating costs. Also, Spectrum Brands’ high debt levels are worrisome.
However, from the deal standpoint, Spectrum Brands is likely to gain by redirecting the sales proceeds and the capital invested in the Global Batteries & Lighting business toward development of its remaining businesses. The company plans to use the divestiture proceeds for debt reduction, reinvestment in core businesses both organically and via strategic buyouts as well as share buybacks.
Moreover, the company is likely to announce plans regarding the businesses it is holding back and deployment of the cash proceeds from the divestiture of the GAC business in its earnings release scheduled for Nov 19.
Under Armour, Inc. (UAA - Free Report) has a long-term earnings growth rate of 20.5% and a Zacks Rank #2.
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Spectrum Brands to Sell Global Auto Care Business, Stock Down
Spectrum Brands Holdings, Inc. (SPB - Free Report) has agreed to sell Global Auto Care (“GAC”) Business to Energizer Holdings (ENR - Free Report) for $1.25 billion in cash and equity. Concurrently, Spectrum Brands also signed an amended agreement for the previously announced sale of Global Batteries & Lighting businesses to Energizer Holdings for $2 billion cash. However, it will retain the Appliances business.
As a result, the company reclassified its Appliances business as continuing operations, comprising the Personal Care and Small Appliances businesses, effective the first quarter of fiscal 2019.
Notably, the sale proceeds from the GAC business will include $937.5 million of cash and $312.5 million of Energizer Holdings’ equity. The transaction, anticipated to close in the second quarter of fiscal 2019, is subjected to fulfilling of customary closing conditions and regulatory approvals. The GAC business mainly includes appearance product category, performance product category and A/C recharge product category. Per Spectrum Brands, this business aptly fits in Energizer’s existing auto care business portfolio. It notes that Energizer has the skills and resources to further expand this business.
Net sales at the GAC segment totaled $175.2 million (up 12.5%), contributing nearly 18.5% to the company’s total sales of $945.5 million in third-quarter fiscal 2018. Organic net sales for GAC grew 12%. Further, the division recorded adjusted EBITDA of $50.1 million, while the company’s overall adjusted EBITDA was $206.4 million.
Coming to the deal related to the Global Batteries & Lighting businesses, the amended agreement is a remedial measure for the consideration of the European Commission (EC). This amendment includes a clause for the potential downward revision of the bid price up to a maximum of $200 million. The company expects to close the deal latest by the start of calendar year 2019, subject to EC’s nod.
Following the news, shares of Spectrum Brands decreased more than 9%. Further, this Zacks Rank #4 (Sell) stock has lost 35% in the past three months, compared with the industry’s 9.8% decline. This underperformance can be mainly attributed to adverse impacts of the rising commodity and freight costs industry-wide and higher operating costs. Also, Spectrum Brands’ high debt levels are worrisome.
However, from the deal standpoint, Spectrum Brands is likely to gain by redirecting the sales proceeds and the capital invested in the Global Batteries & Lighting business toward development of its remaining businesses. The company plans to use the divestiture proceeds for debt reduction, reinvestment in core businesses both organically and via strategic buyouts as well as share buybacks.
Moreover, the company is likely to announce plans regarding the businesses it is holding back and deployment of the cash proceeds from the divestiture of the GAC business in its earnings release scheduled for Nov 19.
2 Picks You Can’t Miss
Lululemon Athletica Inc. (LULU - Free Report) delivered an average positive earnings surprise of 19.2% in the trailing four quarters. It has a long-term earnings growth rate of 19.2% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Under Armour, Inc. (UAA - Free Report) has a long-term earnings growth rate of 20.5% and a Zacks Rank #2.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>