Energizer Holdings has entered into an amended acquisition agreement and proposed a remedy for consideration to the European Commission (EC) in relation to its proposed $2 billion acquisition of Spectrum Brands‘ Battery and Portable Lighting Business. In addition, Energizer also announced that it has entered into a separate definitive agreement to acquire Spectrum Brands’ Global Auto Care Business (Spectrum Auto Care) in a cash and stock transaction valued at approximately $1.25 billion.
Acquisition of Spectrum Battery – Amended Agreement and Proposed Remedy
Energizer says it has been working closely with the EC to develop a mutually acceptable solution to address concerns identified by the EC in its preliminary assessment of the proposed acquisition of Spectrum Battery. The remedy set forth by Energizer includes the divestiture of the Europe-based Varta consumer battery business, including manufacturing and distribution facilities in Germany. Energizer has already obtained approval of the transaction in the United States, Australia and Colombia.
Based on the original purchase price, net of anticipated divestiture proceeds, Energizer now expects the net purchase price to be in the range of $1.4 to $1.5 billion. Spectrum has agreed to share in any decline in value on the sale of the Europe-based Varta consumer battery business below the targeted sales price, up to a maximum of $200 million. Based on the amended agreement, the net sales and adjusted EBITDA of the retained businesses are expected to be in the range of $510 million to $520 million and $80 million to $90 million, respectively. Synergies are now expected to be in the range of $55 million to $65 million. The company says it continues to expect to fully realize all synergies within the first three years of ownership. The present value of the tax step up on assets acquired in the U.S. is expected to be in excess of $100 million. Taking into account tax benefits and synergies, the revised adjusted EBITDA multiple for this amended deal is expected to be in the range of 9 to 9.5 times.
“We continue to be encouraged by the substantial progress that has been made to date in connection with the overall regulatory approval process, and believe our proposed remedy to the European Commission adequately addresses their concerns,” said Alan Hoskins, Energizer’s CEO. “We remain confident in the strategic merits of this revised transaction with Spectrum and will continue to work closely and cooperatively with the European Commission towards reaching final approval.”
Contingent upon the EC’s approval of the proposed remedy, Energizer expects to close this transaction at the beginning of calendar year 2019.
Acquisition of Spectrum Auto Care
In addition to the Battery and Portable Lighting Business, Energizer has announced the proposed acquisition of Spectrum’s Global Auto Care division as well. This portfolio includes some of the industry’s most globally recognizable brands, including Armor All, STP and A/C Pro. Spectrum Auto Care generated net sales and adjusted EBITDA of $465 million and $117 million, respectively, for the 12 months ending June 30, 2018. The purchase price, inclusive of full run-rate synergies of approximately $15 million, implies a multiple of about 10.5 times based on the current adjusted EBITDA run rate.
“The addition of Spectrum’s Auto Care Business adds the iconic Armor All, STP and A/C Pro brands to our portfolio of leading brands and builds upon our highly complementary auto care business,” said Hoskins. “The transaction will enable our retail customers and consumers to benefit from the combined commercial expertise and category insights, and will provide Energizer with the ability to leverage our core marketing and research and development competencies in order to accelerate innovation. We look forward to growing these well-established brands as we continue to accelerate our ability to innovate and effectively serve our customers around the world to drive long-term value for shareholders. This is a truly transformative transaction for Energizer.”
The transaction is subject to customary closing conditions, including regulatory approvals. The acquisition is expected to close in the second fiscal quarter of 2019.
“As we have discussed previously, we have great respect for Spectrum Battery and the strong business the colleagues have built. Now, we are equally excited to bring on board a talented auto care leadership team that has positioned its business well in the categories in which they compete. We believe the combination of the Spectrum team and our existing team will provide a winning formula to propel our combined portfolio to even greater success,” continued Hoskins.
“We have seen the Energizer management team in action for almost a year, and are confident in the industrial logic and synergy potential of this combination and are looking forward to being shareholders in the Company,” said David Maura, executive chairman and CEO of Spectrum Brands Holdings Inc.