Spectrum Brands Holdings, Inc. SPB recently announced the completion of its merger with HRG Group, Inc., its largest shareholder with a 60% controlling stake. Notably, the deal was announced in February 2018. The merged company is named Spectrum Brands Holdings Inc., trading under the ticker symbol "SPB," thus winding down the HRG Group.
Approved by both the companies' shareholders, the merger deal formed an independent company, which will enhance Spectrum Brands' shareholder base and governance structure. As a result, it will create significant value for its shareholders and drive growth across the business. Moreover, the deal offers HRG Group's shareholders to participate in the upside potential of the combined company and benefit from this merger.
Headquartered in Middleton, WI, the newly-formed company will be led by the existing Spectrum Brands' management team and board. As announced earlier, HRG Group implemented a reverse stock split per the terms of the agreement.
Under this, the HRG Group's shareholders obtained shares of the newly-formed company equal to the number of shares of Spectrum Brands which was presently held by HRG Group. However, it is subjective to HRG Group's net debt and transaction charges along with a $200-million upward adjustment for Spectrum Brands acting as an independent public company. Further, Spectrum Brands' shareholders received a share of the combined company in exchange of one share of Spectrum Brands held by them before the merger.
Spectrum Brands has been undertaking strategic steps to manage its business portfolio via acquisitions and divestitures. The company has inked a $2-billion cash deal with Energizer Holdings, Inc. ENR to offload the Global Battery and Lighting Business or Battery Business. Currently, Spectrum Brands is seeking regulatory approvals for this transaction.
Management plans to redirect the capital invested in the Global Batteries & Appliances business toward development of its remaining four businesses, including Hardware & Home Improvement, Global Auto Care, Global Pet Supplies and Home & Garden. Further, Spectrum Brands will use the divestiture proceeds for debt reduction, reinvestment in core businesses both organically and via strategic buyouts as well as share buybacks. These strategic moves are likely to strengthen the company's operating structure and boost its profitability.
However, shares of Spectrum Brands' have lost 15.8% in the past three months against the industry 's 0.6% increase. The underperformance can be attributed to this Zacks Rank #3 (Hold) company's dismal surprise history as it has lagged earnings estimates in four of the last five quarters, while sales missed estimates in six of the trailing seven quarters.
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