The Newell Rubbermaid stock price slipped 11% Monday after the company inked a $13.22 billion deal to buy Jarden Corp. (NYSE: JAH).
Talks of a deal surfaced last week, but Monday's official announcement failed to generate much enthusiasm. Even with today's drop, Newell Rubbermaid Inc. (NYSE: NWL) stock is up 6.2% year to date.
The deal combines Jarden's brands, such as Sunbeam kitchen appliances, Coleman outdoor gear, and Yankee candles, with Newell Rubbermaid's portfolio of food storage products, Goody hair products, and Graco strollers. The acquisition also gives Newell Rubbermaid yearbook and class ring maker Jostens Inc., which Jarden bought for $1.5 billion in October.
The combined company will be named Newell Brands and will boast roughly $16 billion in annual revenue.
Under terms of the deal, Jarden shareholders will receive $21 in cash and 0.862 Newell Rubbermaid shares. That values the deal at $13.2 billion, based on Friday's close. The cash and stock deal implies an offer of $60 per share. That's a 14% premium to Jarden's closing price on Friday and a 24% premium to Jarden's average stock price over the last month.
Newell Rubbermaid said the deal expands its presence in food and beverage, baby products, and kitchen appliances among key retailers and geographies.
"They don't really compete, but they go after the same customers and share areas on the shelf," Jarden founder and CEO Martin Franklin said.
Here's what investors need to know about the Newell Rubbermaid stock price now...
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How to Play the Newell Rubbermaid Stock Price Now
The deal will immediately add to earnings, with strong double-digit normalized earnings per share growth. Guidance on earnings growth will be provided as the deal's completion date nears. The transaction is expected to close in Q2 2016.
Newell Brands should also save more $500 million over the next four years.
Last year, Newell Rubbermaid posted adjusted earnings per share (EPS) of $2 a share, up from $1.83 a share a year earlier. Jarden reported adjusted EPS of $2.70, up from $2.39 in the previous year.
The combined company will be led by Newell Rubbermaid CEO Michael Polk. Jarden founder Martin Franklin will join the board.
That means more deals from Newell Brands are likely...
Franklin built Jarden through acquisitions, making it one of the largest diversified consumer product makers in the United States.
Shares of Jarden rose more than 3% to $55.45 Monday morning on the news. Meanwhile, more than 11% was erased off the Newell Rubbermaid stock price. In early afternoon trading, NWL shares were changing hands at $40.27.
For investors looking to make a hefty profit from the Newell Rubbermaid stock price now, Money Morning Defense & Tech Specialist Michael A. Robinson warns against buying into stocks with deals pending.
"I would caution anyone against buying into buyouts, especially when the news has been out for several days," Robinson continued. "I would avoid it unless you are an experienced, aggressive trader and you really know what you're dealing with. Any new rumor could send the stock in any direction. This is not a great strategy for long-term investors."
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Related Articles:
- The New York Times: Newell Rubbermaid to Buy Jarden for $13.2 Billion
- Reuters: Newell Rubbermaid to Buy Jarden for About $13 Billion
- The Wall Street Journal: Newell Rubbermaid to Buy Jarden for Over $15 Billion