Spectrum Brands to Acquire Tristar Products' Appliance
and Cookware Business and Combine It With Its Home and Personal Care Segment
This New Combined Business Is Intended to
Be Separated From Spectrum Brands, Creating a New Standalone Global Company and
a New Spectrum Brands Consisting of Its Global Pet Care and Home & Garden
Businesses
February 04, 2022 06:30 AM Eastern Standard Time
MIDDLETON, Wis.--(BUSINESS WIRE)--Spectrum
Brands Holdings, Inc. (NYSE: SPB; "Spectrum Brands" or the "Company"), a
leading global branded consumer products and home essentials company focused on
driving innovation and providing exceptional customer service, announced today
it has signed a definitive agreement to acquire the home appliances and
cookware categories of Tristar Products, Inc. (the "Tristar Business") for $325
million, in cash, at closing, up to $100 million, in cash, if certain gross
profit targets are achieved in calendar year 2022 and another $25 million, in
cash or equity of the combined business, if certain other gross profit targets
are achieved in calendar year 2023. The transaction is expected to close within
the next 90 days. The acquisition of the Tristar Business will be funded by a
combination of cash on hand and a $500 million incremental loan incurred as a
new tranche under the Company's existing credit agreement.
"We are excited to
announce the acquisition of the Tristar Business by our Home and Personal Care
("HPC"
"We are excited to announce the acquisition of the Tristar
Business by our Home and Personal Care ("HPC") segment this morning," said
David Maura, Chairman and Chief Executive Officer of Spectrum Brands. "The
strategic combination of the Tristar Business with our HPC segment represents
an exciting key milestone in our pursuit to create a leading higher-margin and
faster-growing company in the global appliances market. The Tristar Business
brings us a fantastic content creation studio, incredible DRTV capabilities and
adds a direct-to-consumer distribution business that we believe can
meaningfully lift HPC's margins and growth rate. For some time, we have been
seeking to successfully execute on an accretive transaction in this space and
are pleased that this acquisition allows us to create a global appliances
leadership platform."
"I am thrilled to have the Tristar Business join a global
organization like Spectrum Brands, which can provide the reach and resources
for this business to drive significantly higher levels of growth. I have no
doubt that this deal will provide a successful future for the combined
business' stakeholders, including all of its employees and consumers. This
partnership also allows the Tristar Business to continue to deliver the most
innovative, value-added and recognizable products. I am a big believer in the
future prospects of this business under Spectrum Brands' ownership and I am
excited to have the deal structured to allow me to participate in the future
financial performance of the business," said Keith Mirchandani, Founder and
Chief Executive Officer of Tristar Products, Inc.
"With this acquisition, we are building a global appliances
platform with combined calendar year 2021 net sales of $1.8 billion and
adjusted EBITDA of $142m. In addition, we expect to achieve $20-30 million in
synergies once this business is completely integrated. This transaction not
only increases our global appliances revenue creating a more scaled and
efficient global appliances business, but it also brings a much needed
direct-to-consumer capability to our combined business. We believe that the
Tristar Business' DTC capabilities and great innovation pipeline are critical
value drivers of the exciting and dynamic business we are committed to creating
through this combination. Their proven "go-to-market" platform has driven the
rapid growth of their chef-inspired consumer brands and has established them as
market leaders in the fast-growing air fry category. More recently, they have
successfully proven their ability to launch line extensions in other categories
such as electric grills, toaster ovens, cookware and other kitchen appliance
categories.
"The Tristar Business can be enhanced by the capabilities and
strengths of our current HPC business. Specifically, we will utilize our
combined business' seasoned and talented management team and our global
presence and experience in a broader array of categories to expand Tristar's
brands and DTC capabilities globally. All in, we expect this strategic
combination to deliver sustained growth and global market leadership in the
appliances space. I look forward to combining the Tristar Business'
capabilities into our business and welcoming all of their employees to our HPC
family," said David Albert, President of Spectrum Brands' HPC segment.
"After the closing of this transaction, our appliances business
will have a powerful portfolio of leading global brands in the home and
personal care appliance space, which will allow us to commence a refresh of our
go-forward brand and product strategy and invest with confidence in building
brand equity for long-term category growth," said David Maura.
"I am excited to announce our intention to create a separate,
pure play global home appliances and personal care company with its own capital
structure and separate balance sheet to pursue other M&A and strategic
transactions. We are currently considering possible scenarios for the combined
business, which include, but are not limited to, a partial or complete spin-off
to our shareholders, an initial public offering or a merger with an existing
publicly traded entity. Subject to market conditions and transaction dynamics,
we intend to update investors on the separation later this year.
"We continue to make good progress on receiving the regulatory
approvals required to complete the sale of our Hardware and Home Improvement
business to ASSA Abloy for $4.3 billion. Following completion of the HHI sale
and execution of our strategic plan for our HPC business, we envision a
Spectrum Brands that is a streamlined, very efficient, higher margin and higher
growth pure play Global Pet Care and Home & Garden company. We are
assessing these options thoughtfully and believe that creating two pure play
businesses, one focused on pet care and home and garden and the other on home
and personal care is the best path for us to maximize growth potential and
long-term shareholder value," concluded Mr. Maura.
Credit Suisse Securities, RBC Capital Markets and Canaccord
Genuity Sawaya Partners acted as financial advisors and Sidley Austin LLP acted
as legal counsel to Spectrum Brands on the transaction. Stifel acted as
exclusive financial advisor and Venable LLP as legal counsel to Tristar
Products.
About Spectrum Brands Holdings, Inc.
Spectrum Brands Holdings is a home-essentials company with a
mission to make living better at home. We focus on delivering innovative
products and solutions to consumers for use in and around the home through our
trusted brands. We are a leading supplier of shaving and grooming products,
personal care products, small household appliances, specialty pet supplies,
lawn and garden and home pest control products, and personal insect repellents.
Helping to meet the needs of consumers worldwide, Spectrum Brands offers a
broad portfolio of market-leading, well-known and widely trusted brands
including Remington®, George Foreman®, Russell Hobbs®, Black+Decker®, Tetra®,
DreamBone®, SmartBones®, Nature's Miracle®, 8-in-1®, FURminator®,
Healthy-Hide®, Good Boy®, Meowee!® , OmegaOne®, OmegaSea®, Spectracide®,
Cutter®, Repel®, Hot Shot®, Rejuvenate®, Black Flag®, and Liquid Fence®. For more information, please
visit www.spectrumbrands.com. Spectrum Brands – A Home Essentials
Company™
About Tristar Products, Inc.
Tristar Products, Inc. is industry recognized as the premier
direct response market leader worldwide. Tristar is an Inc. 5000 company.
Tristar's success relies on our established brands, proven international and
domestic distribution channels, media power in more than 100 countries. Tristar
has established domestic and international market dominance using a 360-degree
approach that includes online, social media, TV media and retail distribution
in major retailers around the world.
Forward-Looking Statements
Certain matters discussed in this press release may be
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. We have tried, whenever possible, to identify
these statements by using the words like "future", "anticipate", "intend",
"plan", "believe", "expect", "project", "forecast", "could", "would", "should",
"will", "may" and similar expressions of future intent or the negative of such
terms. These statements are based upon our current expectations of future
events and projections and are subject to a number of risks and uncertainties,
many of which are beyond our control and some of which may change rapidly,
actual results or outcomes may differ materially from those expressed or
implied herein, and you should not place undue reliance on these statements.
Important factors that could cause our actual results to differ materially from
those expressed or implied herein include, without limitation: (1) the ability
to consummate the announced transaction on the expected terms and within the
anticipated time period, or at all, which is dependent on the parties' ability
to satisfy certain closing conditions and our ability to realize the benefits
of the transaction; (2) the risk that regulatory approvals that are required to
complete the proposed transaction may not be received, may take longer than
expected or may impose adverse conditions; (3) our ability to realize the
expected benefits of such transaction and to successfully integrate the
business; (4) our ability to create an independent Global Appliances business
on expected terms, and within the anticipated time period, or at all, and to
realize the potential benefits of such business; (5) our ability to
successfully separate the Company's Home and Personal Care business and to
realize the expected benefits of such separation terms, and within the
anticipated time period, or at all; (6) our discretion to conduct, suspend or
discontinue our share repurchase program (including our discretion to conduct
purchases, if any, in a variety of manners including open-market purchases or
privately negotiated transactions); (7) the impact of the COVID-19 pandemic on
our customers, employees, manufacturing facilities, suppliers, the capital
markets and our financial condition, and results of operations, all of which
tend to aggravate the other risks and uncertainties we face; (8) the impact of
our indebtedness on our business, financial condition and results of
operations; (9) the impact of restrictions in our debt instruments on our
ability to operate our business, finance our capital needs or pursue or expand
business strategies; (10) any failure to comply with financial covenants and
other provisions and restrictions of our debt instruments; (11) the effects of
general economic conditions, including the impact of, and changes to tariffs
and trade policies, inflation, recession or fears of a recession, depression or
fears of a depression, labor costs and stock market volatility or monetary or
fiscal policies in the countries where we do business; (12) the impact of
fluctuations in transportation and shipment costs, commodity prices, costs or
availability of raw materials or terms and conditions available from suppliers,
including suppliers' willingness to advance credit; (13) interest rate and
exchange rate fluctuations; (14) the loss of, significant reduction in, or
dependence upon, sales to any significant retail customer(s); (15) competitive promotional
activity or spending by competitors, or price reductions by competitors; (16)
the introduction of new product features or technological developments by
competitors and/or the development of new competitors or competitive brands;
(17) the impact of actions taken by significant stockholders; (18) changes in
consumer spending preferences and demand for our products, particularly in
light of the COVID-19 pandemic and economic stress; (19) our ability to develop
and successfully introduce new products, protect our intellectual property and
avoid infringing the intellectual property of third parties; (20) our ability
to successfully identify, implement, achieve and sustain productivity
improvements (including our Global Productivity Improvement Program), cost
efficiencies (including at our manufacturing and distribution operations) and
cost savings; (21) the seasonal nature of sales of certain of our products;
(22) the effects of climate change and unusual weather activity, as well as
further natural disasters and pandemics; (23) the cost and effect of
unanticipated legal, tax or regulatory proceedings or new laws or regulations
(including environmental, public health and consumer protection regulations);
(24) public perception regarding the safety of products that we manufacture and
sell, including the potential for environmental liabilities, product liability
claims, litigation and other claims related to products manufactured by us and
third parties; (25) the impact of existing, pending or threatened litigation,
government regulations or other requirements or operating standards applicable
to our business; (26) the impact of cybersecurity breaches or our actual or
perceived failure to protect company and personal data, including our failure
to comply with new and increasingly complex global data privacy regulations;
(27) changes in accounting policies applicable to our business; (28) our
ability to utilize net operating loss carry-forwards to offset tax liabilities
from future taxable income; (29) the impact of expenses resulting from the
implementation of new business strategies, divestitures or current and proposed
restructuring activities; (30) our ability to successfully implement further
acquisitions or dispositions and the impact of any such transactions on our
financial performance; (31) the unanticipated loss of key members of senior
management and the transition of new members of our management teams to their
new roles; (32) the impact of economic, social and political conditions or
civil unrest in the U.S. and other countries; (33) the effects of political or
economic conditions, terrorist attacks, acts of war, including any potential
conflict in Ukraine, natural disasters, public health concerns or other unrest
in international markets; (34) our ability to achieve our goals regarding
environmental, social and governance practices; (35) our increased reliance on
third party partners, suppliers, and distributors to achieve our business
objectives; (36) the ability to consummate the announced Hardware and Home
Improvement ("HHI") divestiture on the expected terms and within the
anticipated time period, or at all; (37) the risk that regulatory approvals
that are required to consummate the proposed HHI divestiture may not be
realized, may take longer than expected, or may impose adverse conditions; and
(38) the other risk factors set forth in the securities filings of Spectrum
Brands Holdings, Inc. and SB/RH Holdings, LLC, including our fiscal 2021 Annual
Report and subsequent Quarterly Reports on Form 10-Q.
Some of the above-mentioned factors are described in further
detail in the sections entitled "Risk Factors" in our annual and quarterly
reports, as applicable. You should assume the information appearing in this
press release is accurate only as of the date hereof, or as otherwise
specified, as our business, financial condition, results of operations and
prospects may have changed since such date. Except as required by applicable
law, including the securities laws of the United States and the rules and
regulations of the United States Securities and Exchange Commission, we
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise,
to reflect actual results or changes in factors or assumptions affecting such
forward-looking statements.
Non-GAAP Financial Measures
Management believes that certain non-GAAP financial measures may
be useful in certain instances to provide additional meaningful comparisons
between current results and results in prior operating periods. Within this
release reference is made to adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA). Adjusted EBITDA is a metric used by
management to evaluate segment performance and frequently used by the financial
community which provides insight into an organization's operating trends and
facilitates comparisons between peer companies, since interest, taxes,
depreciation and amortization can differ greatly between organizations as a
result of differing capital structures and tax strategies. Adjusted EBITDA also
is one of the measures used for determining compliance with the Company's debt
covenants. Adjusted EBITDA excludes certain items that are unusual in nature or
not comparable from period to period. Spectrum Brands provides this information
to investors to assist in comparisons of past, present and future operating
results and to assist in highlighting the results of on-going operations. While
Spectrum Brands' management believes that non-GAAP measurements are useful
supplemental information, such adjusted results are not intended to replace the
Company's GAAP financial results and should be read in conjunction with those
GAAP results.
The combined sales and EBITDA for the global combined appliances
platform consist of (1) the Company's HPC segment with net sales of $1,261.3
million and adjusted EBITDA of $79.1 million for the last twelve-month ("LTM")
period ended January 2, 2022 and (2) the Tristar Business with net sales of $546.4
million and an assessed adjusted EBITDA of $62.9 million for their fiscal year
ended December 31, 2021. Reconciliations of all Spectrum non-GAAP measures to
the most comparable GAAP measures for the consolidated group and its segments,
including the HPC segment, are included in the Company's 2021 Annual Report
included in Form 10-k filed with the SEC, and subsequent Quarterly Reports on
Form 10-Q, available at the Investor Relation section at www.spectrumbrands.com. The following is a reconciliation of
the adjusted net income from continuing operations to adjusted EBITDA for the
HPC segment for the LTM period ended January 2, 2022.
(in millions, except %) |
Fiscal Year Ended |
Plus: Three Month |
Less: Three Month |
LTM Period Ended |
||||||||
Net
income from continuing operations |
$ |
46.1 |
$ |
19.0 |
$ |
38.2 |
$ |
26.9 |
||||
Depreciation and amortization |
44.0 |
7.8 |
8.8 |
43.0 |
||||||||
EBITDA |
90.1 |
26.8 |
47.0 |
69.9 |
||||||||
Restructuring and related charges |
9.1 |
0.6 |
2.6 |
7.1 |
||||||||
Transaction related charges |
3.4 |
- |
1.3 |
2.1 |
||||||||
Adjusted EBITDA |
$ |
102.6 |
$ |
27.4 |
$ |
50.9 |
$ |
79.1 |
||||
Net Sales |
$ |
1,260.1 |
$ |
379.7 |
$ |
378.5 |
$ |
1,261.3 |
||||
Adjusted EBITDA Margin |
8.1
% |
7.2
% |
13.4
% |
6.3
% |
The impact from the Company's corporate adjustments attributable
to income tax expense, interest expense, and share based compensation are not
reflected in the reconciliation of non-GAAP measures for the HPC segment, but
such adjustments would not impact the adjusted EBITDA figure as presented. The
operating results of the Tristar Business consist of unaudited financial
information provided by Tristar Products, Inc., for the fiscal year ended
December 31, 2021, including the operating results attributable to the combined
businesses of the home appliances and cookware categories, plus an allocation
of certain corporate costs from Tristar Products, Inc. that would be assumed
with the acquisition of the Tristar Business. Adjustments to Adjusted EBITDA
may not be consistent to those adjustments presented and disclosed by Spectrum
Brands.
Contacts
Investor/Media Contact: Jeremy Smeltser
608-275-4917
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