Spectrum Brands Holdings, Inc. (SPB) recently declared that it has closed the previously announced buyout of The Procter & Gamble Company’s (PG) European pet food business. However, financial terms of the deal remained undisclosed.
The acquired pet food business comprises premium brands like IAMS and Eukanuba for dogs and cats. Spectrum Brands had made the announcement of its plan to acquire P&G’s European pet food unit in Sep 2014.
Going by that announcement, the acquisition will form part of Spectrum Brands’ United Pet Group division, which manufactures products for the global pet supplies market, with well-known brands like Tetra, Marineland, FURminator, Nature’s Miracle and Dingo to its credit. Generating annual sales of about $200 million, this business will provide significant product brand equity and has the potential to enhance margins.
The acquisition of these complementary brands will help Spectrum Brands’ United Pet Group division to expand into the $21 billion European dog and cat food market, which is progressing with a growth rate of 3% to 5% annually. Further, the addition of these brands will strengthen the division’s companion animal product portfolio while bringing stability to it as well as to the aquatics segment’s portfolio.
Spectrum Brands anticipates the addition of these brands to be accretive to its business in the first year itself, though full integration is expected to take place by the second year of the acquisition. Also over time, the company expects this deal to generate cost, production and distribution synergies.
Spectrum Brands’ emphasis on expansions and acquisitions in order to drive long-term growth has always appealed to investors. In early 2014, the company ventured into a new product line with the acquisition of leading animal repellents company, The Liquid Fence Company Inc.
We believe that the company’s focus on expansion via these acquisitions is likely to drive its business and help it provide superior service to its consumers.
Spectrum Brands currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include FTD Companies, Inc. (FTD), with a Zacks Rank #1 (Strong Buy) and Nutrisystem, Inc. (NTRI), with a Zacks Rank #2 (Buy).
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