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Spectrum Brands' (SPB) Armitage Buyout to Drive Pet Business

The prevailing stay-at-home trend due to the COVID-19 health crisis has been forcing people to spend more time with their pets. Consequently, companies are reinforcing their pet-care business for smooth product supply via tie-ups and buyouts. Treading the same path, Spectrum Brands Holdings, Inc. SPB unveiled the buyout of U.K.-based Armitage Pet Care Ltd. (Armitage) for roughly $180 million. Notably, this buyout will be an addition to the buyer’s Global Pet Care segment.

Being a leader in the premium pet treats and toys across the United Kingdom and continental Europe, Armitage’s inclusion is likely to expedite growth at Spectrum Brands’ flourishing Global Pet Care business.

We note that Spectrum Brands’ Global Pet Care consists of Nature’s Miracle pet-mess clean-up products, FURminator deShedding Tools and SmartBones raw-hide-free dog chews, which have been gaining popularity in the U.K. pet-specialty market. Meanwhile, Spectrum Brands’ global scale and resources are expected to drive Armitage brands throughout the United Kingdom, across continental Europe and beyond. Spectrum Brands’ takeover of Armitage is also likely to aid the e-commerce business of the latter.

On the other hand, Armitage’s wide range of pet-aisle staples, including Good Boy dog treats, chews and toys; Wild Bird seeds, nuts and treats; Meowee! cat treats and toys; and Wafcol sensitive diets will add sheen to Spectrum Brands’ Pet Care business. Notably, Armitage recorded more than $80 million net sales in the past one year, and witnessed sales growth at a compound annual rate of 17% over the last few years.

We note that Spectrum Brands’ Global Pet Care business has been exhibiting strength. Sturdy gains from aquatic and companion animal categories, coupled with strong e-commerce sales, has been aiding the segment’s performance and driving the company’s overall top line. During third-quarter fiscal 2020, sales for the Global Pet Care business improved 8.9%. Excluding the adverse impacts of foreign currency and sales from acquisitions, organic sales rose 8.3%.

In sync with its Global Productivity Improvement Plan, the company is looking to exit non-core assets and activities to focus on core brands. Additionally, the company is on track with its plans to tap into the aquatics and reptile space. In this context, Spectrum Brands is progressing well with the integration process of its newly acquired Omega Sea, which is now part of its Global Pet Care portfolio of aquatic brands.

Cumulatively, the pet segment remains poised for growth backed by its pipeline of robust innovation and growth strategy. This is turn is likely to work in favor of Spectrum Brands, which currently carries a Zacks Rank #2 (Buy) and has gained 21.6% in the past three months, compared with the industry’s 1.9% rise.

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