Spectrum Brands, the consumer products company that exited bankruptcy protection in August, said Tuesday it is acquiring Russell Hobbs in an all-stock deal.
Atlanta-based Spectrum counts Remington shavers, Cutter insect repellents and Rayovac batteries in its portfolio. It said it will form a new holding company that will retain the Spectrum name with Russell Hobbs being folded in as a subsidiary.
The announcement to create a new company with $3 billion in annual global sales was paired with Spectrum's fiscal first quarter results. It narrowed its loss in the quarter to $60.2 million, or $2.01 per share, from $112.6 million, or $2.19 per share in the prior-year comparable quarter.
The privately-held Russell Hobbs, based in Miramar, Fla., is a marketer of branded household appliances under the George Foreman, Black & Decker, Toastmaster and Farberware brand names.
The company employs about 500 and is valued at $661 million. It is wholly owned by Harbinger Capital Partners, a New York -based investment firm.
Spectrum has 5,700 employees and is valued at $965 million. Harbinger owns about 40 percent of Spectrum shares and is the company's largest shareholder.
Combined, the companies project $3 billion in revenue per year, a beefed up balance sheet and more diverse but complimentary product lines.
The deal is expected to close by the end of June. Spectrum shareholders will receive one share of the new company for every Spectrum share they own.
After the deal is complete, Harbinger will own a 63.7 percent stake in the combined entity.
"We think we're in a position to be able to focus on growth again," Kent Hussey, Spectrum's chief executive, said Tuesday in an interview. The key driver of the deal for Spectrum is that it will bring down some of its debt-load.
The deal allows Spectrum to de-lever its capital structure, refinance both firms' combined debt and increase liquidity.
At the end of the quarter, Spectrum had $1.534 billion in debt, compared with $2.60 billion a year ago.
Some of that debt came as a result of two large acquisitions the company made in 2005.
Carrying that debt in a down economy, coupled with mounting quarterly losses and tightening credit markets forced the company to explore selling some of its holdings.
"It wasn't that we didn't like the businesses, we had a lot of debt and we had to address that," Hussey said. This newest acquisition won't be a repeat of the past, he said.
For one, Russell Hobbs has little outstanding debt and the firms' product lines, while complimentary, don't overlap.
"This makes a lot of sense on a lot of fronts," Hussey said. "We will be careful in terms of bringing in the Russell Hobbs organization. We learned some lessons in 2005, so we don't make those mistakes again."
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