Shares in Newell Rubbermaid fell as much as 10 per cent on Monday as the market reacted negatively to its $15.4bn acquisition of Jarden, a rival maker of household goods.
The Atlanta-based group, which makes things from Sharpie markers to Rubbermaid tupperware, said it would buy Jarden’s outstanding stock and convertible debt in a move that will boost its revenues to $16bn.
Such is the randomness of Jarden’s portfolio that comedian John Oliver jokingly defined the company on his HBO show as the maker of “anything you would find left behind after a burglary”.
The offer values shares in Jarden at $60 a piece and comprises $21 in cash and the remainder in Newell stock.
It represents a 25 per cent premium to Jarden’s undisturbed share price, before it emerged that the two companies were in talks about a deal. Jarden has net debt of about $4.8bn, bringing the enterprise value of the deal to $20.2bn.
By the close of trading on Monday, Newell shares fell 6.9 per cent to $42.15, while Jarden shares rose 2.7 per cent to $54.08.
“Jarden has been my baby for 15 years, there is no way I would have sold it to Newell if I didn’t believe in the new management and opportunities that lay ahead for the combined group,” Mr Franklin told the Financial Times.
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Mr Franklin, son of Sir Roland Franklin, a long-time lieutenant of the late British corporate raider Sir James Goldsmith, will join the board of the newly combined group, which will be renamed Newell Brands.
Michael Polk, the current chief executive of Newell, who first approached the British-born entrepreneur about a potential merger in September at an industry conference in Boston, will take on the reins of the newly combined group.
“I will be Mike’s main cheerleader and will remain very involved at the board level in helping the company grow,” said Mr Franklin, who added that he quickly bonded with Mr Polk as they discovered that they both shared a passion for Breckenridge Bourbon.
The deal will allow the 51-year-old founder of Jarden to focus on building his recently created Nomad Foods, an investment vehicle that acquired Europe’s largest frozen foods company Iglo for €2.6bn and the continental European operations of Findus for more than £500m. He is expected to expand in the US with fresh deals in the food sector next year.
“This is a transformational deal for us that will allow us to double our presence in markets like UK, Mexico, Canada,” said Mr Polk. “Both companies have a lot to be proud of, and we intend to take the best of both and unlock the synergies for growth and margin.”
Mr Polk expects that the new combined group will generate about $500m in cost-saving synergies, driven by the new company’s bigger scale to negotiate procurements. Jarden has revenues of about $10bn, and Newell has revenues of nearly $6bn.
Newell, which has an investment grade rating that it hopes to retain once the groups are combined, said it hopes to close the transaction in the second quarter of 2016.
Centerview Partners and Goldman Sachs acted as financial advisers to Newell, while Jones Day and Simpson Thacher & Bartlett provided legal counsel. Barclays and UBS advised Jarden, together with Greenberg Traurig and Kane Kessler.
Date: December 14, 2015