Sterno Products, LLC, a subsidiary of Compass Diversified Holdings LLCCODI , has recently announced its plans to acquire Rimports Inc., a leading manufacturer and distributor of wickless candle products and other home-run items, for $145 million. Compass Diversified intends to fund the transaction using a revolving credit arrangement.
The deal is expected to help Sterno Products expand its customer base by offering scented wickless candle products in addition to its existing portable food warming fuels and emergency candles products.
According to research by Grand View Research, Inc, there a is huge market potential for home fragrance products with the North American fragrance wax melts market expected to reach $2.90 billion by 2024. A rising demand for aromatherapy and maintenance of proper home ambience is making more and more consumers opt for the safe and eco-friendly wax melts. Geographically, North America is already the largest market in the world for fragrance wax melts, with United States accounting for more than 80% market share. An increasingly stressful lifestyle for the working millennials has resulted in more people seeking the benefits of aromatherapy and home fragrance products for mood enhancement.
Keeping this huge market potential in mind, the acquisition of Rimports seems to be a strategic fit.
Compass Diversified, the parent company, owns several profitable middle market businesses that are market leaders in their respective product niches. The company has controlling interests in eight diversified businesses and creates shareholder wealth by proactively managing these entities. In addition, the company often monetizes its controlling stake in these businesses to improve its return on investment.
Compass Diversified has a Zacks Rank #4 (Sell). Shares of the company have underperformed the industry in the last three months with an average loss of 0.5% against a rally of 6.1% for the latter.
Whether such acquisitions can propel its shares in the future remain to be seen.
Better-ranked stocks in the industry include Artisan Partners Asset Management Inc. APAM , Eaton Vance Corp. EV and Federated Investors, Inc. FII , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Artisan Partners has an expected long-term earnings growth rate of 13.7%.
Eaton Vance has an expected long-term earnings growth rate of 20.2%.
Federated Investors has an expected long-term earnings growth rate of 9.5%. It has exceeded estimates in each of the trailing four quarters with an average beat of 4.5%.
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