Spectrum Brands Jumps 17.8% Following Assa Abloy Deal

Global branded consumer products and home essentials provider Spectrum Brands Holdings (SPB) has signed an agreement with Swedish conglomerate Assa Abloy (ASAZY) to sell its Hardware & Home Improvement (HHI) business for $4.3 billion in cash.

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The deal is likely to strengthen Spectrum Brands’ balance sheet and simplify business around three units — Home and Personal Care, Home & Garden and Global Pet Care. Shares of the company surged 17.8% to close at $93.08 on Wednesday. (See Spectrum Brands stock chart on TipRanks)

Spectrum Brands offers personal insect repellents, lawn and garden and home pest control products, specialty pet supplies, small household appliances, personal care products, plumbing, shaving and grooming products, residential builders’ hardware and residential locksets.

The CEO of Spectrum Brands, David Maura, said, “Our remaining business will be more focused, allowing us to prioritize innovation to accelerate organic growth and pursue synergistic acquisitions to further drive value creation in Global Pet Care and Home & Garden, while continuing to look for strategic and organic ways to enhance the value of Home and Personal Care.”

The President and CEO of Assa Abloy, Nico Delvaux, said, “HHI is an excellent addition to the Assa Abloy Group and constitutes an important strategic step in developing our residential business in North America. This acquisition advances our strategy to strengthen our position by adding complementary products to the core business and it will further accelerate the transformation from mechanical to digital solutions.”

Following the completion of the transaction, Spectrum Brands expects to receive net proceeds of around $3.5 billion, which it plans to use to repay debt, fund complementary acquisitions, invest for organic growth and return capital to shareholders.

Two months ago, Wells Fargo (WFC) analyst Christopher Carey maintained a Buy rating on the stock with a price target of $115 (23.6% upside potential). The analyst expects the company to report earnings per share (EPS) of $0.86 in the third quarter.

Overall, the stock has a Strong Buy consensus rating based on 5 unanimous Buys. The average Spectrum Brands Holdings price target of $107 implies upside potential of 15%. The company’s shares have gained 53.1% over the past year.