After the news of Newell Rubbermaid Inc.’s NWL intentions to acquire Jarden Corp. JAH broke last week, these consumer goods companies signed a definitive deal yesterday to merge the two entities, which will be worth nearly $16 billion.
Newell plans to sponsor this acquisition with cash, debt and equity. Per the deal terms, for each Jarden share, its stockholders will be entitled to receive cash worth $21, along with 0.862 Newell shares.
The combined firm, which will be named Newell Brands, will create a solid brand portfolio by bringing together the diverse operations of both companies. Consequently, it will bring brands like Mr. Coffee machines, Rawlings baseballs, PaperMate pens, Rubbermaid containers, Graco baby strollers and others, under the same roof.
This combination is expected to be a complementary fit, as it will help both the companies expand their operations, leverage their combined capabilities and achieve cost efficiencies. This in turn is likely to boost growth and enhance margins.
Consequently, Newell expects this merger to generate additional annual cost synergies of roughly $500 million over four years. Also, this buyout is anticipated to augment Newell’s bottom line by delivering robust double-digit normalized earnings per share immediately after the synergies are realized. Also, annual adjusted EBITDA is envisioned to be more than $3 billion after the synergies.
Apart from this, Newell expects to maintain its credit rating after the deal closure to utilize the combined entity’s solid cash flow to curtail its debt over the short term. Also, the company intends to move toward achieving a target leverage ratio of 3–3.5 times within a 2–3 year time frame. Further, Newell remains committed to its shareholders, as it plans to maintain or raise its current annualized dividend per share, post the acquisition.
In an attempt to enhance operations and ensure seamless integration, Newell announced various management changes for Newell Brands.
Newell’s existing Chief Executive Officer (“CEO”), Michael B. Polk, will serve Newell Brands in the same role, with Mark S. Tarchetti set to assume the role of the latter’s President. Tarchetti is currently Newell’s Chief Development Officer.
Also, Newell Brands’ board will include three Jarden Corp. directors. However, Newell’s present non-executive Chairman, Michael T. Cowhig, will assume the same role for Newell Brands’ board of directors post the closure of the deal.
We believe that this transaction, which is anticipated to close in the second quarter of 2016, will generate immense opportunities for stockholders, employees and customers. The merged entity will help accelerate business growth by combining scales of both ventures and capitalizing on the combined talent, which in turn, should boost profitability for both firms.
Zacks Rank
Newell currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Blue Buffalo Pet Products, Inc. BUFF and Ollie's Bargain Outlet Holdings, Inc. OLLI, each with a Zacks Rank #2 (Buy).
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 >>
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
Be the first to comment