Newell Rubbermaid to Acquire Jarden for $15.4 Billion

  • Deal creates consumer-products giant with sales of $16 billion
  • Transaction of cash and stock values Jarden at $60 a share

Newell Rubbermaid Inc. agreed to buy Jarden Corp. for about $15.4 billion, creating a consumer-products giant with a sprawling portfolio that will use its increased size to cut costs and bolster investment in its most-promising businesses.

The new company, called Newell Brands, will have $16 billion in sales, according to a statement Monday. Jarden investors will receive cash and stock valued at about $60 a share -- 24 percent higher than the closing price on Dec. 4, the last trading day before media reports said merger talks had begun. Newell will issue $5 billion of debt to complete the transaction and expects to keep its investment-grade debt.

“This deal is about creating scale,” Chris Ferrara, an analyst for Wells Fargo & Co., said Monday in a research note. “Jarden is a portfolio to which Newell can apply its blueprint of integration, cost savings and selective reinvestment for growth.”

The move is a bet that Newell can gain efficiency and clout with large vendors such as Wal-Mart Stores Inc. from Jarden’s more than 100 far-flung brands, including everything from Oster appliances and K2 skis to Yankee Candle. Newell Rubbermaid Chief Executive Officer Michael Polk, who will run the combined entity, is aiming to squeeze $500 million in costs out of the business within four years.

Jarden’s shares climbed 2.7 percent to $54.09 on Monday. The stock was already up 10 percent this year, lifted by earlier reports that the Newell deal was under way. Newell fell 6.9 percent to $42.15.

Struggling Customers

Monday’s stock reaction may reflect concerns about how much debt the new combined company will have, according to Louis Meyer, a special-situations analyst at Oscar Gruss & Son Inc. in New York. Also troubling is that big-box retailers, the main customers of Newell and Jarden, have been posting lackluster results, Meyer said.

Jarden's Franklin

Jarden's Martin E. Franklin has built up the company over the past 14 years.

Photographer: Jonathan Fickies/Bloomberg

“You don’t want to take on a lot of debt when the business of your customers is stagnating,” Meyer said. “There’s a lot of concerns about the health of retailers.”

When the merger is completed, Newell stockholders will own 55 percent of the combined company. It will build on Newell’s existing stable of brands, which includes Graco strollers, Sharpie pens, Rubbermaid and many others.

The deal “has significant merit both for growth and scale,” Steph Wissink, an analyst for Piper Jaffray & Co., said in a research note. There could be more than the announced $500 million in cost savings, and Newell has more rigorous product innovation, she said.

Dealmaking Spree

The transaction caps a 14-year run for Jarden Executive Chairman Martin E. Franklin, who used acquisitions to build the company’s vast array of brands. The current business traces its roots to 2000, when Franklin and long-time partner Ian Ashken tried and failed to acquire Alltrista Corp., a troubled manufacturer of plastics. After pushing for seats on the board, Franklin was named CEO and Ashken took the role of the chief financial officer. That company became Jarden.

Franklin, 51, who will earn a payout of more than $100 million on the deal, and Ashken will serve on the board of the combined company. Newell Chairman Michael Cowhig is staying on in that role. Jarden CEO Jim Lillie won’t remain with the company after the deal, which is expected to close in the second quarter.

Private Equity

Jarden has been described as a publicly traded private-equity firm because of its penchant for buying brands and improving them. It has acquired about 30 companies since its founding in 2001, with the latest coming in October when it agreed to pay about $1.5 billion for Visant Holding Corp., which owns the school-memorabilia maker Jostens.

Newell Rubbermaid, meanwhile, was formed when the company bought Rubbermaid Inc. for about $6 billion in 1999. Newell and Jarden are looking to use the company’s new heft to attack markets such as baby products and kitchenware. The business will have annual adjusted earnings before interest, taxes, deprecation and amortization of more than $3 billion once the cost savings are realized, according to the statement.

(An earlier version of this story was corrected to fix the value of the deal.)

Before it's here, it's on the Bloomberg Terminal.