Newell Returns to Takeover Mode With $573 Million in Dealsby
Food-storage firm Sistema generates $145 million in revenue
Candle maker Smith Mountain has annual sales of $65 million
Newell Brands Inc., which purchased Jarden Corp. for $15 billion earlier this year, is getting back to buying companies sooner than planned.
The consumer-products giant has agreed to buy Sistema Plastics, a New Zealand-based maker of food-storage containers, for NZ$660 million ($473 million), according to a statement Monday. It’s also acquiring candle maker Smith Mountain Industries for $100 million.
The deals are part of Chief Executive Officer Mike Polk’s plan to focus Newell’s product portfolio on categories and brands with the most growth potential. The company -- which more than doubled its size after the addition of Jarden’s sprawling assortment in April -- already agreed to sell its tools business in October and plans to unload other assets such as its Voelkl and K2 winter-sports brands.
“These are fast-growing businesses that play in our core categories,” Polk said in an interview. “They present a tremendous opportunity to complement a very strong, organic growth agenda in our existing businesses.”
Newell rose 1.1 percent to $46.02 at 10:06 a.m. in New York. The shares were up 3.3 percent this year through last week.
In October, Polk said Newell would resume making acquisitions in 12 to 18 months, giving it time to sell off brands to help pay down the debt from the Jarden deal. Newell sped up that timeline because it has executed divestitures quicker and for bigger payouts than expected, he said.
The company has set a goal of reducing its leverage to 3 to 3.5 times earnings before interest, taxes, depreciation and amortization by the end of 2018. Polk expects to reach the threshold before that because these deals, which total $573 million, were made with cash on hand and didn’t draw from the expected U.S. proceeds from selling assets. So Newell isn’t adding any debt and buying two companies that have annual sales gains “well above” Newell’s projected growth rate of 3 to 4 percent in core sales, Polk said. Revenue by that measure excludes the impact of changes in currency values, acquisitions and divestitures.
By buying these two closely held companies, Newell is betting that people will keep making more purchases for their homes as they spend more time there thanks to conveniences like video-streaming services and restaurant-ordering apps. Auckland-based Sistema generates $145 million in annual sales of plastics for microwave cooking or storing leftover food. Sistema will complement Newell’s Rubbermaid brand by giving the company its first presence in these categories in markets such as Australia, France and the U.K.
Smith Mountain, located in Forest, Virginia, has $65 million in yearly revenue with its WoodWick candle brand. Its items are moderately priced and will be paired with the premium offerings of Yankee Candle, one of the signature brands from the Jarden deal. Newell is also expanding Yankee’s distribution in Europe and WoodWick will likely follow a similar path, Polk said.
“It’s good to have multiple brands in a category because there are different preferences,” Polk said. “These new brands will allow us to grow faster.”