Spectrum Brands (SPB) Completes $4.3B Sale of Hardware and Home Improvement Business
Spectrum Brands Holdings, Inc. (NYSE:) today announced the closing of the previously announced sale of the Company’s Hardware and Home Improvement business (“HHI”) to ASSA ABLOY for $4.3 billion in cash, prior to customary purchase price adjustments.
David Maura, Spectrum Brands’ Chief Executive Officer, said, “We are very pleased to complete this transaction, which is the culmination of a tremendous amount of hard work. I am thankful for our management team’s efforts and the steadfast support and encouragement of our Board of Directors and stockholders. We could not have asked for a better partner in ASSA ABLOY and could not be happier to have them as the new stewards of our business and employer of our former colleagues.
“Today’s closing delivers significant liquidity and strength to our balance sheet providing us with solid financial footing to execute on our objectives both strategically and operationally in this increasingly uncertain and challenging economic environment. After taxes, fees, and customary price adjustments, we expect to receive approximately $3.6 billion of net proceeds from this sale.
“We intend to use the proceeds from the sale to materially reduce our indebtedness, strengthen our operating performance and fund opportunistic M&A activities. We will also be in a position to return a substantial amount of capital to our stockholders.
“We remain committed to our strategic goal of becoming a faster growing, higher margin, pure play Global Pet Care and Home & Garden company by ultimately separating our Home & Personal Care business from our remaining businesses in the medium term. These initiatives are a testament to our commitment to delivering value to our stockholders and underscores our view that our Company has significant upside potential.”
The Company intends to reduce its indebtedness by approximately $1.6 billion by repaying in full the outstanding loans under its term loan facility and revolving credit facility, which had outstanding loans in a principal amount of $392 million and $715 million, respectively, as of the time of close, and by redeeming in full our 5.75% Notes due July 15, 2025, of which approximately $450 million in aggregate principal amount is outstanding. Following these repayments, the Company intends to permanently terminate the $500 million of revolving loan commitments under its $1.1 billion revolving credit facility, with the remaining $600 million of revolving loan commitments being available under its credit agreement for subsequent borrowings.
The Company’s Board of Directors has approved a new stock repurchase program authorizing the purchase of up to $1 billion of common stock, replacing the prior stock repurchase program. Pursuant to this program, the Company intends to enter into an accelerated share repurchase agreement to purchase an aggregate of $500 million of the Company’s common stock. After paying down debt and funding this ASR, the Company expects to be at a net cash position at the end of fiscal 23.
Finally, the Company also intends to use a portion of the transaction proceeds to invest in its long-term operating performance and free cash flow generating capacity. The Company will continue to seek opportunities to invest in its employees and talent base, marketing, advertising and innovation of new products and IT infrastructure. Additionally, the Company will continue to monitor the market for opportunistic, attractive and synergistic M&A opportunities particularly within its Global Pet Care business. Until deployed, the Company will invest the remaining proceeds in highly rated, liquid depository accounts, time deposits, and money market funds, taking advantage of the investment returns available from the attractive current market rates.
As previously announced, on September 8, 2021, Spectrum Brands announced an agreement to sell HHI to ASSA ABLOY, subject to receipt of regulatory approvals and satisfaction of customary closing conditions. On September 15, 2022, the U.S. Department of Justice (the “DOJ”) filed a lawsuit to block the closing of the sale and on December 2, 2022, in order to address the DOJ’s concerns, ASSA ABLOY entered into an agreement to sell its Emtek and the Smart Residential Business in the U.S. and Canada to Fortune Brands. Thereafter, on May 5, 2023, the parties entered into a stipulation with the DOJ to settle the lawsuit and receive the DOJ’s approval for the completion of the sale. Finally, on June 5, 2023, the parties received the final remaining regulatory approval from the Mexican competition authority to complete the transaction.