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Energizer Closes Buyout of Spectrum Brands' GAC Business

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Energizer Holdings, Inc. (ENR - Free Report) has successfully completed the buyout of Spectrum Brands’ (SPB - Free Report) Global Auto Care (“GAC”) business. As part of the deal, Energizer paid $937.8 million in cash and 5.3 million shares of common stock to Spectrum Brands. 

The GAC business mainly includes appearance, performance and A/C recharge product categories. Spectrum Brands believes that Energizer’s skills and resources would further expand this business, and hence it aptly fits in Energizer’s existing auto care business portfolio. 

Earlier this month, Energizer acquired Spectrum Brands’ Global Battery and Lighting Business for $2 billion in cash. The company is likely to gain on the addition of well-known battery brands like Rayovac and Varta to its portfolio. In particular, the Varta brand will enhance the company’s footprint in Latin America. Additionally, the takeover is likely to expand Energizer’s battery manufacturing footprint, which is expected to help the company ramp up supply.

Some other notable buyouts in the auto care space include HandStands and Reed-Union Corporation. These brands along with the company’s existing Lexol and Eagle One products are likely to aid Energizer in building its auto care business, both organically and through acquisitions.  

Coming back to Energizer, this Zacks Rank #3 (Hold) stock has declined 20.7% in the past three months, against the industry’s growth of 2.4%. This can be mainly attributed to dismal margins in the fourth quarter of fiscal 2018, owing to unfavourable foreign currency translation. Going ahead, Energizer anticipates gross margin to contract 30-70 basis points (bps) due to the above-mentioned factors. Also, commodity costs are expected to hurt the company’s margins by 80 bps in fiscal 2019.  Further, the company is reeling under high debt levels that may hurt profitability in the near future. 

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