Shares of Newell Rubbermaid Inc. NWL and Jarden Corp. JAH jumped 7.4% and 3.7%, respectively, after news of their merger made the rounds yesterday. Also, Newell hit a 52-week high of $50.90 yesterday, before closing at $48.16.
Sources revealed that the merger will create an entity with a solid brand portfolio, bringing together the diverse operations of these companies. The combined entity will include brands like Mr. Coffee machines, Rawlings baseballs, PaperMate pens, Rubbermaid containers, Graco baby strollers and others. This combination is expected to be a complementary fit, as it will help both the companies expand their operations further.
While Newell’s market cap is larger than that of Jarden’s, the latter’s revenue generation has been robust on the back of its solid acquisitions so far. As quoted by Bloomberg, Jarden expects sales to surge 16% year over year to over $10 billion in 2016, while Newell projects sales of nearly $6.1 billion for the same time period.
In fact, both Newell and Jarden have been gaining momentum, backed by their numerous acquisitions. Expanding as a leading provider of niche consumer products used in home food preservation, Jarden’s focus on acquisitions is evident from its latest buyouts of Waddington food containers and Jostens class rings and yearbooks.
As for Newell, this Sharpie producer has always been keen on strengthening its portfolio by investing in key segments, reducing activities with marginal profitability, and exiting certain businesses and markets. This is evident from Newell’s acquisition of Elmer’s Products, Ignite Holdings LLC and bubba brands inc.
Further, to curtail its non-performing assets and simplify its portfolio structure, the company sold its medical cart business to Caspa Solutions, its Endicia online postage business to Stamps.com, and is on track to sell its Levolor and Kirsch window coverings brands. Also, it plans to remove the Calphalon retail outlet stores and kitchen electrics businesses.
We believe that these constant endeavors will help these companies sharpen their focus on creating a faster growing, higher margin and more profitable combined entity. The deal terms remain undisclosed and there is no guarantee at the moment that it will materialize.
If Newell and Jarden manage to crack the deal, the combined entity will be worth over $20 billion and will likely generate annual sales of about $14 billion, as reported by The Wall Street Journal.
Zacks Rank
Both, Newell and Jarden currently carry a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Blue Buffalo Pet Products Inc. BUFF, with a Zacks Rank #2 (Buy). Another well-ranked stock in the broader consumer staples sector is The Clorox Company CLX, also carrying a Zacks Rank #2.
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