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ATLANTA – Rayovac Corp., a global consumer products company with a diverse portfolio, announced today that it has reached an agreement to acquire United Industries Corp. The transaction calls for Rayovac to issue 13.75 million shares of its common stock, along with additional consideration of $70 million in cash, to United Industries' current shareholders, for a total value of approximately $1.2 billion including the assumption of approximately $880 million of United Industries debt and a cash tax benefit of $140 million. This acquisition extends Rayovac's household products offerings into the large and growing lawn and garden and specialty pet supply categories, while leveraging the company's operational expertise and existing relationships with global retailers.
Privately held United Industries, based in St. Louis, Mo., is a leading manufacturer and marketer of consumer products for lawn and garden care and household insect control, operating as Spectrum Brands in the United States and NuGro in Canada. United also holds a leading position in the fragmented but fast-growing U.S. pet supply market, manufacturing and marketing premium branded specialty pet supplies through its United Pet Group. Among United's brands are Spectracide, Vigoro, Sta-Green, Schultz and C.I.L. in the lawn and garden market; and Hot Shot, Cutter and Repel in the household insect control market. United estimates total 2004 pro forma sales of $950 million (assumes acquisitions made during 2004 were part of United's results for the entire twelve months) to customers including The Home Depot, Lowe's, Wal-Mart, PETCO and PETsMART.
“Rayovac's publicly stated goal has been to grow through acquisitions that diversify and increase our revenue base while leveraging our global merchandising and distribution capabilities. United Industries is just such an acquisition," said David A. Jones, chairman and chief executive officer of Rayovac. "Upon closing, we will have a significant presence in several new consumer products markets – large growth categories where we can capitalize on our strengths with major retailers to leverage the full potential of the powerful combined enterprise."
Added Jones: "This is a truly transforming transaction for Rayovac, representing a major step forward toward our goal of achieving annual revenues of $3 billion."
"We are extremely pleased to join a company that clearly believes in our brands, our markets and our merchandising strategy," said United Industries Chief Executive Officer Robert L. Caulk, who is expected to join Rayovac's senior management team. "We share Rayovac's belief that our products will flourish as part of a larger company with an integrated global manufacturing, distribution and information services platform and a more significant relationship with our customers."
The transaction is subject to approval under the Hart-Scott-Rodino Anti-trust Improvements Act and other customary closing conditions. Rayovac plans to enter into a new senior secured credit facility and issue senior subordinated notes in connection with the acquisition. Existing United Industries debt of approximately $880 million will be redeemed or replaced by the new credit facility. The transaction has been approved by United's shareholders. The transaction is expected to close in February.
United is 83-percent owned (on a fully diluted basis) by the Thomas H. Lee Equity Fund IV, a private equity fund managed by Thomas H. Lee Partners and affiliates (THL). It is anticipated that following the transaction THL will hold an ownership position in Rayovac of approximately 25 percent. The shares of Rayovac common stock received by United shareholders in the transaction will be issued pursuant to an exemption from registration under the federal securities laws. Rayovac has agreed to file a shelf registration within nine months following closing to allow for the sale of such shares. As part of the transaction, the shares issued to United shareholders will be subject to a lockup agreement expiring one year after the closing date relative to 50 percent of the shares and 18 months after the closing date for the remaining 50 percent. In addition, two new Class II seats will be added to Rayovac's current eight-person board of directors, to be filled by candidates selected by the THL shareholders.
Rayovac and THL were previously partners when THL invested in Rayovac Corp.in 1996. THL maintained a significant interest in Rayovac until August 2002. Jones was a board member of United Industries from 1999 to 2003. Rayovac noted that an independent committee of its board was established to evaluate, negotiate and approve the terms of the transaction. Citigroup Global Markets Inc. served as advisors to the independent committee of the Rayovac board of directors. Merrill Lynch & Co. served as financial advisor to Rayovac Corp., and Goldman Sachs & Co. advised United Industries.