Newell Rubbermaid, the parent company of many consumer brands including Rubbermaid, Parker and Waterman, will acquire Jarden Corporation at about $60 a share, including $21 in cash and the balance in shares, and take over its debt of $5.2 billion. The purchase price is 25 percent higher than Jarden's share price before the information about a pending deal began to circulate. Including the debt, it gives Jarden an enterprise value of $20.2 billion.
As the stock market closed after the news broke out on Monday, the price of Jarden's shares had gone up on the day by 2.7 percent to $54.08, while Newell's shares had fallen by 6.9 percent. A law firm in Louisiana is investigating the acquisition, feeling that it possibly under-valued Jarden's net worth.
The combined group will be called Newell Brands. It will have annual sales of about $16 billion and operating earnings before amortization (Ebitda) of more than $3 billion. Newell Rubbermaid's shareholders will have a stake of about 55 percent in the new group.
In a conference call, executives of the two companies indicated that they may review their respective brand portfolios after one to two years' time. It seems likely that Jarden's Outdoor Solutions segment will come under scrutiny at that stage, possibly inviting bids by other investors for some or all of its 20-plus sports brands, which include Coleman, Shakespeare, Marmot Mountain, K2, Völkl, Marker, Dalbello, Ride Snowboards, ExOfficio, Rawlings, Zoot, etc.
The segment's sales have remained more or less flat at around $2.7 billion in the past few years, while its operating earnings have fallen to less than $200 million. In 2014, it made only a partial contribution to Jarden's total revenues of $8.3 billion and its net profit of $512 million, but Jarden's household goods segment has been more profitable, and it offers a clear potential for synergies with the brand portfolio of Newell Rubbermaid.
The new group expects to generate incremental cost synergies of about $500 million over the next four years, and it is taking a similar amount of debt to finance the merger. The parties to the merger said that their complementary portfolios are expected to accelerate growth in food & beverages, baby products, commercial products, kitchenware and appliances.
Jarden's chief executive, Jim Lillie, will leave the company after the merger, as Michael Polk, CEO of Newell Rubbermaid, will become the CEO of Newell Brands. Mark Tarchetti, chief development officer of Newell Rubbermaid, will be its president. Bill Burke, chief operating officer of Newell Rubbermaid, will lead the legacy Jarden business upon completion of the transaction.
Jarden's chairman, Martin Franklin, and its vice chairman, Ian Ashken will join the board of the new company. Franklin plans to keep half of his shares after the transaction, making him the biggest single shareholder of the new group. They and Lillie are expected to make a huge profit with the shares they will tender.
Franklin, who is now 51, is said to be planning new investments in the food business. He is the son of Sir Roland Franklin, a former aide to the late Sir James Goldsmith, a British investor who was involved with Adidas in the past. He joined the former Altrista in 2001, when it was still mostly a canning company. He renamed it Jarden, and working together with Lillie and Ashken, he built it up into a huge conglomerate managing more than 120 brands of consumer products, mostly through acquisitions.