Spectrum Brands' GAC Unit Sale Receives Regulators' Nod

An image of a man at his desk working using two monitors Credit: Shutterstock photo

Spectrum Brands Holdings Inc.SPB is moving closer to the completion of the transaction related to the sale of Global Auto Care ("GAC") business to Energizer Holdings Inc. ENR . As a positive sign, the Federal Trade Commission approved the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Additionally, the companies received a nod from the Polish Competition Authority for the transaction along with attaining antitrust clearance in all required markets.

Additionally, the "go shop" provision for the transaction also expired on Dec 20. After the satisfaction of all regulatory conditions, the companies are likely to close the transaction by February 2019.

Notably, the sale proceeds from the GAC business will include $937.5 million of cash and $312.5 million of Energizer Holdings' equity. The GAC business mainly includes appearance product category, performance product category and A/C recharge product category. Per Spectrum Brands, this business aptly fits in Energizer's existing auto care business portfolio. It notes that Energizer has the skills and resources to further expand this business.

Net sales at the GAC segment totaled $175.2 million (up 12.5%), contributing nearly 18.5% to the company's total sales of $945.5 million in third-quarter fiscal 2018. Organic net sales for GAC grew 12%. Further, the division recorded adjusted EBITDA of $50.1 million while the company's overall adjusted EBITDA was $206.4 million.

Concurrent with the GAC deal signed in November 2018, Spectrum Brands and Energizer also amended the previous agreement where Spectrum Brands will sell its Global Batteries & Lighting businesses to Energizer Holdings for $2 billion cash. As part of the amendment, Spectrum Brands will now retain the Appliances business. Consequently, the company reclassified the Appliances business as continuing operations, comprising the Personal Care and Small Appliances businesses, effective from the first quarter of fiscal 2019.

The amended agreement is a remedial measure for the consideration of the European Commission (EC). This amendment includes a clause for the potential downward revision of the bid price up to a maximum of $200 million. The company expects to close the sale of Global Battery and Lighting business in early January 2019.

Management plans to redirect the capital invested in these businesses toward the development of its core business units - including Hardware & Home Improvement, Home & Garden, Pet, and Appliances. Further, Spectrum Brands will use the divestiture proceeds for debt reduction, reinvestment in strategic buyouts and share buybacks.

Shares of Spectrum Brands reacted little to the news. Further, this Zacks Rank #3 (Hold) stock has lost 46.1% in the past three months compared with the industry 's 23.7% decline. This underperformance can be mainly attributed to adverse impacts of the rising commodity and freight costs and higher operating costs. Additionally, Spectrum Brands' high debt levels are worrisome.

2 Consumer Discretionary Picks You Can't Miss

Vista Outdoor Inc. VSTO delivered average positive earnings surprise of 42.9% in the trailing four quarters. The company currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

PCM, Inc. PCMI has a long-term earnings growth rate of 20% and a Zacks Rank #2 (Buy).

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Energizer Holdings, Inc. (ENR): Free Stock Analysis Report

PCM, Inc. (PCMI): Free Stock Analysis Report

Vista Outdoor Inc. (VSTO): Free Stock Analysis Report

Spectrum Brands Holdings Inc. (SPB): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.