Newell Rubbermaid agreed Monday to buy Jarden Corp.’s hodge-podge lineup of 120 stalwart consumer brands — including Mr. Coffee, Marmot and Rawlings — to mix and match with its own parade of familiar household names — Sharpie, Contigo and Elmer’s — in a deal it values at $15.4 billion. The new entity, Newell Brands, will have annual revenue estimated at $16 billion and expects to see $500 million in cost savings over four years, according to the release announcing the deal.
“Both companies have been collectors of consumer product brands whose rivals are generally smaller niche players,” write Serena Ng and Mark Maremont for the Wall Street Journal. “Some of their brands complement each other, such as Newell’s Graco baby strollers and Jarden’s Nuk baby bottles and feeding tools. Jarden owns Crock-Pot slow cookers, while Newell owns Calphalon pots and pans.”
Jarden executive chairman and founder Martin Franklin and Newell CEO Michael Polk were introduced to each other by an investment banker at a conference in September and merger talks heated up last month. “If we were larger … we would be doing the same deal and be the buyer,” Franklin tells Ng and Maremont in an interview.
Newell is based in Atlanta; Jarden in Boca Raton, Fla. Polk will be CEO of Newell Brands. Franklin will join its board, along with Ian G. H. Ashken, co-founder, vice chairman and president of Jarden, and a third colleague, but will have no day-to-day responsibilities.
“Franklin is known on Wall Street as one of the savviest dealmakers, methodically buying brands like Yankee Candle, Jostens, K2 and Waddington Group and tucking them into a consumer products conglomerate that’s dramatically outperformed the S&P 500 Index,” writes Antoine Gara for Forbes. “Now, Franklin is selling the business he built up over 14-years, and which has gained approximately 4000% under his watch.”
Franklin’s father, Sir Roland Franklin, is “a long-time lieutenant of the late British corporate raider Sir James Goldsmith,” write James Fontanella-Khan and Arash Massoudi for Financial Times, in reporting that shares in Newell Rubbermaid fell as much as 10% as the market reacted negatively to the deal, eventually closing down 6.9% Monday. Jarden shares were up 2.7%.
Analysts “pointed to disappointment” that Franklin “will not have an executive role in the new company,” according to a BBC report.
“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,” Franklin tells the FT.
The deal will allow Franklin time to concentrate on “his two other, acquisition-focused companies,” reports Leslie Picker in the New York Times — Platform Specialty Products, producer of high technology specialty chemical products and provider of technical services based in West Palm Beach, Fla., and Nomad Foods, a frozen foods company with major brands across Europe including Birds Eye, Findus and Iglo.
“Franklin initially had no intention of selling Jarden,” Picker writes, but the share price of both of his other companies have been dropping “sharply” in recent months. A couple of weeks ago, “Franklin traveled to Newell Rubbermaid’s product development facility in Kalamazoo, Mich., and said he was impressed by the operation,” Picker writes. “Mr. Polk was taken with Jarden’s direct-to-consumer e-commerce capabilities. The larger scale from combining the two companies could also help them in negotiations with retailers and suppliers.”
Indeed, the consolidation “comes amid growing pressure for retailers to hold down prices as they compete with online players such as Amazon,” points out Reuters’ Yashaswini Swamynathan, citing an October report that Wal-Mart, which provides nearly 13% of Newell Rubbermaid's revenue, was asking suppliers to cut prices.
“The deal, while primarily aimed at accelerating growth, will make it easier for Newell to fend off demands for price cuts,” Neil Saunders, CEO of research firm Conlumino, tells Swamynathan.
“The scale of our combined businesses in key categories, channels and geographies creates a much broader canvas on which to leverage our advantaged set of brand development and commercial capabilities for accelerated growth and margin expansion,” Polk says in the release.
We’ll start to see what that actually means if the transaction closes, as expected, in the second quarter of 2016.