Stanley Black & Decker agreed on Tuesday to sell its hardware and home improvement unit to Spectrum Brands Holdings for $1.4 billion in cash, as the company seeks to whittle down its product portfolio.
Through the deal, Spectrum, which owns Rayovac batteries and George Foreman grills, will acquire a maker of locksets and residential faucets. The division, with brands like Kwikset and Baldwin, reported about $895 million in net sales and $188 million in adjusted earnings in the year ended June 30.
Stanley Black & Decker is moving is to jettison a business that is aimed primarily at the domestic market, while searching for ways to grow internationally. The company plans to maintain exposure to the improving housing market through its construction and do-it-yourself division. The company will use the proceeds from the sale to help pay for its own $850 million acquisition of Infastech, a specialty fastener company with a promising market position in Asia.
“ While HHI is a healthy and profitable business, its characteristics are inconsistent with Stanley Black & Decker's strategic objectives of diversifying our revenue base through further expansion into targeted end markets with higher growth and margin profiles, including emerging markets,†John F. Lundgren, the company's chief executive, said in a statement.
Spectrum has been focused on building out the company's existing portfolio. The latest purchase is expected to add to Spectrum's pro forma earnings per share by 75 cents to 80 cents in its 2013 fiscal year, excluding integration costs. Spectrum also said the deal will add to free cash flow, helping to pay down the company's $1.8 billion in long-term debt.
“The scale and expanded product offering we gain will further balance our sales profile and provide exciting cross-selling opportunities from expanding sales of Spectrum Brands' products to major U.S. home improvement centers and increasing HHI sales to l eading global mass merchants and other Spectrum Brands' retailers,†David Lumley, the company's chief executive, said in a statement.
The hardware and home improvement division will operate as a separate subsidiary within Spectrum. Its president, Greg Gluchowski, will report to Mr. Lumley.
The deal is expected to close by the end of March. Spectrum was advised by Deutsche Bank, Barclays and the law firm Paul, Weiss, Rifkind, Wharton & Garrison.
