Energizer Holdings, Inc. (ENR - Free Report) has completed the sale of its Europe-based Varta consumer battery business to Germany-based VARTA Aktiengesellschaft (VARTA AG). The $2-billion battery business operates in Europe, the Middle East and Africa. The deal will help VARTA AG expand its product portfolio and strengthen position in the portable battery space.
Per sources, the company had inked a definitive agreement worth $401 million with VARTA AG on May 29, 2019. The sale of the Varta business is in sync with Energizer’s previous commitment with the European Commission to comply with the purchase of Spectrum Brand Holdings’ (SPB - Free Report) battery and portable lighting business.
With the acquisition of Spectrum Brand Holdings' battery and portable lighting business in January 2019, Energizer emerged as the largest provider of battery products in most of the markets under the European Economic Area (EEA). The European Commission, before approving the deal, pointed out that the transaction will significantly reduce competition in the EEA countries, leading to increased prices and reduced choice for consumers. As part of its proposal to address the concerns raised by the commission, Energizer had offered to divest Spectrum Brands' Varta-branded and unbranded household and specialty batteries, chargers and portable lighting business in the Europe, the Middle East and Africa region (EMEA).
Coming back to the Varta divestiture, media reports revealed that Spectrum Brands is expected to pay roughly $200 million to Energizer, according to the closing conditions of the deal. In this regard, the company estimates net proceeds from VARTA AG and Spectrum Brands to be nearly $300 million, which will be used to reduce debt. As of Sep 30, 2019, the company has a long-term debt of approximately $3.5 billion.
Further, Energizer expects the rest of its acquired battery business to help boost efficiencies, contain costs and improve relationships with retail customers. In the fourth quarter of fiscal 2019, sales from the company’s combined battery business (which accounts for 78.1% of total revenues) increased 37.7% year over year to $561.4 million. In fiscal 2020, management expects revenues from the battery business to be up 1-2%.
All said, we expect Energizer to gain from its strategic initiatives, including mergers, acquisitions and divestitures, and brand strength. Shares of this Zacks Rank #3 (Hold) company have gained 19% in the past three months, outperforming the industry’s growth of 2.3%.
Procter & Gamble (PG - Free Report) has an impressive long-term earnings growth rate of 7.5% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
General Mills (GIS - Free Report) , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 7%.
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