Atlanta (ouch!) based Rayovac is expected to announce a $476M acquisition of closely held United Industries, a consumer-products maker of such brands as Cutter insect repellant, Sta-Green fertilizer, and Eight in One Pet supplies, according to Dennis Berman

The move is the latest in Rayovac’s plan to transform itself from a seller of low-cost batteries, which has been its focus for nearly 100 years, into a diversified purveyor of consumer products. In acquiring United, which operates under the Spectrum Brands name in the U.S., Rayovac expects its battery sales to account for just 40% of overall revenue, down from 67%.
The deal will pay St. Louis-based United a total of $406 million in Rayovac shares, which closed trading Monday on the New York Stock Exchange at $29.56. Rayovac will also pay $70 million in cash to United’s shareholders, while redeeming or replacing $900 million of United’s outstanding debt. The companies are targeting cost savings of about $70 million to $75 million, company executives said. They said the deal will be immediately accretive to Rayovac’s earnings.

Seems rather strange that a battery company would acquire a fertilizer and insect repellant firm, until I read that “both have long been under the wing of private-equity firm Thomas H. Lee Partners“. Ah, sounds like packaging for a bigger deal. Madison has growing risk here with respect to Rayovac’s ongoing employment.

Rayovac’s move comes amid tight competition from leading battery brands Duracell and Eveready. Atlanta-based Rayovac has aggressively moved into new product categories, last year buying the Remington Products electric-shaver business. Last year, overall Rayovac sales hit $1.4 billion, while United registered sales of $950 million. Rayovac has said previously that it hopes sales will grow to more than $3 billion over the next few years. The company’s shares have climbed 42% in the last year after positive quarterly earnings results.
The United transaction, however, underscores how powerful a few large retailers have become to the success of midsize companies such as Rayovac. In buying United, said Rayovac Chairman and Chief Executive David A. Jones, the company can better use its relationships, distribution and marketing at such retailers as Wal-Mart Stores Inc. and Home Depot Inc. “Retailers are looking for sophisticated suppliers,” Mr. Jones said. In branching out, “We become more important and vital to them.”
The transaction weds two companies that have long been under the wing of private-equity firm Thomas H. Lee Partners. The firm owns 87% of United, and held significant stakes in Rayovac until September 2002. Following the deal’s closing, which is expected in about six weeks, Thomas H. Lee Partners will own about 25% of Rayovac.
Merrill Lynch and Investment Banking Group advised Rayovac, while Citigroup advised the company’s independent committee of its board of directors. Goldman Sachs & Co. advised United Industries.