Notable Mergers and Acquisitions of the Day 10/09: (SPB)/(SWK) (CYT) (DDD) (PRPH)

October 9, 2012 10:21 AM EDT
  • Spectrum Brands Holdings (NYSE: SPB) has signed a definitive agreement to acquire the Hardware & Home Improvement Group (“HHI”) of Stanley Black & Decker, Inc. (NYSE: SWK) for $1.4 billion in cash.

    HHI is a manufacturer of residential locksets, residential builders’ hardware and faucets for residential applications with such renowned brands as Kwikset, Weiser, Baldwin, National Hardware, Stanley, FANAL, Pfister and EZSET. HHI is a leader in its key markets with #1 positions in U.S. residential locksets (Kwikset), Canada residential locksets (Weiser), U.S. luxury locksets (Baldwin), and U.S. builders’ hardware (Stanley/National Hardware), and a top 5 position in U.S. faucets (Pfister).

    HHI generated net sales of approximately $985 million and adjusted EBITDA of $188 million for the 12 months ended June 30, 2012.1 Approximately 85 percent of HHI’s annual revenues are generated in North America, with more than 40 percent coming through U.S. home improvement centers.

    The acquisition is expected to increase Spectrum Brands’ top-line growth and margins, and to be immediately accretive to EPS, EBITDA and free cash flow before synergies. EPS accretion pro forma for a full year of results is expected to be between $0.75 to $0.80 per share in fiscal 2013 and EPS accretion in fiscal 2014 is expected to exceed $1.00 per share, excluding one-time transaction and integration costs and including synergies. The acquisition also is expected to add more than an incremental $90 million of free cash flow in the first two years after closing.

    On a combined basis for the 12 months ended July 1, 2012, HHI would have accounted for 23 percent of Spectrum Brands’ total revenues and 28 percent of adjusted EBITDA.i On the same basis for Spectrum Brands’ three current segments, Global Batteries & Appliances would have accounted for 53 percent of revenues and 46 percent of adjusted EBITDA; Home & Garden would have accounted for 9 percent of revenues and 13 percent of adjusted EBITDA; and Pet Supplies would have accounted for 14 percent of revenues and 16 percent of adjusted EBITDA, in each case, excluding corporate/unallocated items from segment EBITDA.

    Following the closing of the transaction, HHI will operate as a separate unit within Spectrum Brands and be managed by Greg Gluchowski, current President of the HHI Group at Stanley Black & Decker. He will report to Spectrum Brands CEO David Lumley and will continue to oversee a highly experienced HHI management team with a proven track record of innovation, operational excellence and profitable growth.

    The acquisition of HHI also includes certain assets of Tong Lung Metal Industry Co. Ltd. (“Tong Lung”), a Taiwanese manufacturer of residential and commercial locksets with facilities in Taiwan and the Philippines. Spectrum Brands will pay $1.4 billion in cash at closing for HHI and the Tong Lung assets, adjusted for net debt and working capital. The purchase price and associated transaction fees and expenses are expected to be funded through a new term loan, which will replace the Company’s existing term loan credit facility, and new senior unsecured notes through the Company’s wholly owned subsidiary Spectrum Brands, Inc. As part of this transaction, Spectrum Brands has received financing commitments from Deutsche Bank and Barclays.

    The transaction is expected to close in two stages. The financing and the acquisition of HHI are expected to close during the Company’s first quarter of fiscal 2013 ending December 31, 2012. The acquisition of the Tong Lung assets is expected to occur during the Company’s second quarter of fiscal 2013. $100 million of the purchase price will be held in escrow from the financing until the subsequent closing of the Tong Lung portion of the acquisition. The closing of the transaction, which has been approved by the Boards of Directors of both Spectrum Brands and Stanley Black & Decker, is subject to customary closing conditions, including receipt of applicable regulatory approvals.

    Spectrum Brands’ lead financial advisor for this transaction is Deutsche Bank and its legal advisor is Paul, Weiss, Rifkind, Wharton & Garrison LLP. Barclays also advised Spectrum Brands on the transaction.

  • Cytec Industries Inc. (NYSE: CYT) announced today a definitive agreement to divest its Coating Resins business to Advent International, a global private equity firm for $1,032 million plus assumed liabilities of $118 million bringing the total value to $1,150 million. The sale is expected to close in the first quarter 2013, following the satisfaction of regulatory requirements and other customary closing conditions.

    J.P. Morgan acted as Cytec`s financial advisor.

  • 3D Systems (NYSE: DDD) has acquired Rapidform, a leading global provider of 3D scan-to-CAD and inspection software tools, located in Seoul, South Korea for $35 million in cash, subject to final closing adjustments.

    Rapidform's reverse engineering and inspection software empower product developers to deliver improved product quality and shorter time-to-market. By combining scan data processing, mesh optimization, auto surfacing and CAD modeling in a single, integrated tool, Rapidform has unlocked the power of 3D digitization for engineers and manufacturing professionals worldwide.

    3D Systems expects Rapidform to contribute $15 million of revenue and deliver between $0.06 and $0.09 in earnings per share to its 2013 non-GAAP results.

  • Matrixx Initiatives, Inc. increased its offer to acquire all of the outstanding shares of ProPhase Labs, Inc. (NASDAQ: PRPH) by 14.3% to $1.60 per share.

    The revised offer represents a premium of 51.7% over the 30-day average closing price of ProPhase's stock and a 53.7% premium to ProPhase's average closing price over the 12 months preceding September 6, 2012 (the day ProPhase's founder and former Chairman, Guy J. Quigley, filed a Schedule 13D announcing Matrixx's purchase of a three-year option to acquire 1.45 million shares of ProPhase common stock). Matrixx had initially proposed an all-cash acquisition of ProPhase for $1.40 per share on May 29, 2012.
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