Wisconsin-based global consumer products company, Spectrum Brands Holdings Inc. (NYSE: SPB) announced today that it intends to acquire the Hardware & Home Improvement Group (HHI) of Stanley Black & Decker (NYSE: SWK) for $1.4 billion in cash.
HHI manufactures residential locksets, residential builders’ hardware and plumbing fixtures and has renowned brands including Kwikset, Weiser, Baldwin, National Hardware, Stanley, FANAL, Pfister and EZSET. It holds majority of market share through its popular brands in US and Canada.
As per HHI’s latest fiscal results for the period ended June 30 2012, it generated net revenues of $985 million and adjusted EBITDA of $188 million. Over 85 percent of its annual revenues were generated from North America, with more than 40 percent coming through U.S. home improvement centers.
SPB believes that the acquisition of HHI will boost its top-line growth and margins. Thus it aims to purchase HHI including the assets of Taiwanese manufacturer, Tong Lung Metal Industry Co. Ltd for $1.4 billion in cash and the associated transaction fee and expenses will be funded by a new term loan.
SPB is waiting on the receipt of applicable regulatory approvals and expected to complete the transaction at two stages; the financing and acquisition of HHI are expected to close during the Q1 2013 ending Dec 31 2012, later during Q2 2013, it will acquire the Tong Lung Assets. $100 million of the purchase price will be held in escrow from the financing until the subsequent closing of the Tong Lung portion of the acquisition.
Following the closing of the transaction, HHI will operate as a separate unit within Spectrum Brands and be managed by Greg Gluchowski, current President of the HHI Group at Stanley Black & Decker.
The purchase is expected to increase SPB’s debt to total capital ratio and accretive to EPS, EBITDA and free cash flow immediately. Synergies are expected to add incremental $90 million of free cash flow in the first two years of closing.
At the last check, SPB shares were trading 12.20% higher at $46.18 with volume up from its daily average of 0.18 million to 1.12 million. The stock opened today at $45.35 and has been trading so far in the range of $45.11 and $47.59.
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