Newell Brands Inc. (NWL - Free Report) has agreed to sell its sporting goods subsidiary, Rawlings Sporting Goods Company, Inc., to a fund managed by Seidler Equity Partners (“SEP”). The private investment firm has partnered with Major League Baseball (“MLB”) for the transaction. The sale will include the Rawlings, Miken and Worth brands of the St. Louis, MO-based subsidiary.
Newell Brands will receive gross proceeds of nearly $395 million from the transaction. Further, after-tax proceeds from the sale are expected to be about $340 million. The company plans to use these proceeds for deleveraging and share repurchases. Rawlings generated net sales of about $330 million in 2017.
The company’s agreement to sell Rawlings is in sync with its Accelerated Transformation Plan. The plan is expected to create value and transform the company into a simpler, stronger and faster one to leverage its abilities with respect to innovation, design and e-commerce. It aims at restructuring Newell’s portfolio in to seven core consumer segments that can generate above $9 billion sales; offloading non-core businesses; utilizing proceeds from divestitures along with free cash flow to lower debt and make share repurchase; and retaining investment grade rating with annual dividend of 92 cents per share through 2019, targeting 30-35% payout ratio.
Further, the execution of the plan will lead to simplification of the company’s operations, which is likely to reduce the company’s number of manufacturing facilities by 66%, distribution centers by 55%, brands by 45% and employees by 39%. It will also reduce above 30 ERP systems to two by the end of 2019. Moreover, management will focus on right-sizing the cost structure for anticipated smaller net sales, remove stranded corporate expenses and recover synergies lost through divestitures. These efforts will help improve operational performance and enhance shareholder value amid a rapidly changing retail backdrop.
Coming back to Rawlings, this iconic sports brand is likely to gain from its association with Seidler Equity Partners and Major League Baseball. These firms will recognize new opportunities for Rawlings and its employees. The companies expect to complete the transaction in 30-45 days, depending upon the satisfaction of customary closing conditions and regulatory approvals.
Following the news, shares of Newell Brands rose 1.6%. However, this Zacks Rank #3 (Hold) stock has decreased 14.5% in the past month, wider than the industry’s decline of 1.3%.
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