Energizer Holdings is to acquire Spectrum Brands’ (SPB) Global Battery and Portable Lighting Business (Spectrum Batteries) for USD2.0 billion in cash.
Anchored by the Varta and Rayovac brands, the portfolio has a longstanding history, global footprint and diversified range of products including alkaline, carbon zinc, hearing aid and nickel metal hydride rechargeable batteries as well as battery chargers and portable lighting products.
The combination will expand Energizer’s presence in a number of international markets, broaden Energizer’s product portfolio and manufacturing capabilities, and increase capacity for research and development. This will enable consumers to benefit from accelerated innovation and a wider range of products, and provide the opportunity to drive cost efficiencies to enhance the Company’s ability to compete in the category.
Spectrum Batteries generated 2017 revenue and EBITDA of USD866 million and USD169 million, respectively. The acquisition price represents a transaction multiple of 7.5 times Fiscal 2017 EBITDA, net of tax benefits with a net present value of approximately USD100 million and including estimated run-rate synergies of USD80 to USD100 million and the costs to achieve. The transaction is expected to deliver modest accretion to Energizer’s adjusted earnings per share and free cash flow in the first year, excluding one-time transaction and integration costs, and will achieve additional favourable accretive impacts following our realisation of targeted synergies.
“The acquisition of Spectrum Batteries represents a compelling strategic, operational, and financial fit for Energizer,” says Alan R Hoskins, Chief Executive Officer of Energizer. “The combination will enable us to leverage Spectrum Brands’ manufacturing assets, significantly expand our international business and enhance our long-term brand building capabilities as we broaden our portfolio with the Varta and Rayovac brands and our geographies with Spectrum Batteries’ passionate global colleagues. We have great respect for Spectrum Batteries and the strong business its colleagues have built, and are excited to bring together the talented colleagues from around the globe from both organisations to drive our business to new heights. In addition, the top-line and free cash flow growth from this acquisition, combined with the opportunity to realise meaningful synergies, will further enhance our ability to drive long-term shareholder value.”
Energizer intends to fund the acquisition through a combination of existing cash and committed debt facilities, expected to consist of a new term loan and senior notes. In addition, Energizer intends to maintain its existing senior notes, maturing in 2025.
The transaction is subject to customary closing conditions, including regulatory approvals. The acquisition is expected to close prior to the end of calendar 2018.
Barclays acted as exclusive financial advisor and King & Spalding acted as legal counsel to Energizer on the transaction. Barclays and J.P. Morgan have committed to provide financing for the transaction.
