The leading consumer brands company Fortune Brands Inc. announced that its board of directors has given the final nod to proceed with the split of the company’s Home & Security business effective October 3, 2011, at business close. Post spin-off, the Fortune Brands Home & Security business is proposed to be traded under the symbol ‘FBHS’ while the spirit business will be rechristened Beam Inc. and will replace the current “FO” symbol with the eponymous “BEAM”.
Before the final spin-off, Home & Security will pay a cash dividend of $500 million to Fortune Brands. Additionally, Fortune Brands will allocate all the shares of Fortune Brands Home & Security to its shareholders in the form of a cash dividend. The shareholders of Fortune Brand will be credited with one share of Fortune Brand Home & Security for each share of Fortune Brand they hold.
The company cited that the two businesses are well poised to create long-term value for shareholders with their competitive, financial and organizational strength capable of securing better-than-market growth.
Fortune Brands had earlier announced its intention to split the company into three standalone units, giving investors pure plays in golf, home products and alcoholic drinks. reholders in a tax-free transaction. The ensuing spin-off of the Home & Security business, in a tax-free transaction, is integral to this original plan. The radical separation has been the outcome of four years of strategic evaluation conducted by Fortune’s board and management.
Fortune Brands is the largest spirits company in the U.S. and the fourth largest in the world. The company faces intense competition from well-established players in the market such as Diageo plc (DEO - Analyst Report) and Brown-Forman Corporation (BF.B - Analyst Report) in its spirits business and Masco Corporation (MAS - Analyst Report) in its home and hardware business.
Currently, Fortune Brands has a Zacks #3 Rank, implying a short-term Hold rating on the stock. We hold a long-term Neutral recommendation on the stock.