The 5 questions needs to answer as per case and data (excel) provided in attachment.
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Microsoft Word - Newell Rubbermaid Jarden v1.docx ! 0! ! ! ! ! ! ! ! ! C o p y r i g h t * 2 0 1 5 * S t e v e n * F e r r a r o 5 * N o * p a r t * o f * t h i s * c a s e * m a y * b e * r e p r o d u c e d , * s t o r e d * i n * r e t r i e v a l * s y s t e m s , * u s e d * i n * a * s p r e a d s h e e t * o r * t r a n s m i t t e d * i n * a n y * f o r m * o r * b y * a n y * m e a n s * * 5 * e l e c t r o n i c , * m e c h a n i c a l , * p h o t o c o p y i n g , * r e c o r d i n g , * o r * o t h e r w i s e * – * w i t h o u t * t h e * p e r m i s s i o n * o f * t h e * a u t h o r . * Newell%Rubbermaid’s%Acquisition%of% Jarden%Corporation% % % On% December% 7,% 2015,% Newell% Rubbermaid% announced% that% it% had% successfully% negotiated%the%purchase%of% Jarden%Corporation.% %The%combined% firm%would%have%an% enterprise%value%of%approximately%$22%billion.%%The%combination%is%expected%to%create% significant%cost%reductions%and%possible%revenue%enhancements.% % This%case%is%developed%solely%for%the%basis%of%classroom%discussion%and%is%not%intended% to%serve%as%an%endorsement,%or%to%illustrate%effective%or%ineffective%management.% Fall*15% 08!Fall* Newell Rubbermaid’s Acquisition of Jarden Corporation ! ! 1! Introduction* ! Rumors!of!a!potential!combination!of!Jarden!Corporation!and!Newell!Rubbermaid! surfaced!in!September!of!2015!following!a!meeting!of!executives!from!each!of!these! companies! at! an! investor’s! conference! hosted! by! Barclays.! On!December! 7,! 2015,! Michael! B.! Polk,! President! and! CEO! of! Newell! Rubbermaid! (NWL)! and! Martin! E.! Franklin,!founder!and!Executive!Chairman!of!Jarden!Corporation!(JAH),!announced! that!Newell!Rubbermaid!would!be!purchasing!Jarden!for!approximately!USD!$13.2! billion,!or!$60.00!per!share.!!The!shareholders!of!JAH!would!receive!$21!in!cash!and! 0.862! NWL! shares! for! each! JAH! share! held.! ! The! combination!would! result! in! an! enterprise! worth! approximately! $25! billion! and! would! offer! NWL! material! cost! reduction! opportunities! due! to! the! complimentary! product! lines! of! the! two! companies.! Jarden*Corporation*(JAH)* ! Jarden!Corporation!was! founded! in!1991! and! is! headquartered! in!Boca!Raton,! Florida.!!JAH!manufactures,!markets,!and!distributes!consumer!products!worldwide.!! Martin! Franklin! built! JAH! through! a! series! of! acquisitions1,! making! it! one! of! the! largest!diversified!consumer!products!makers!in!the!United!States.! ! JAH!is!number! one!in!many!of!the!product!categories!where!it!competes.! ! The! company’s! Outdoor! Solutions! segment! offers! camping! and! outdoor! equipment;! fishing! and! team! sports! equipment;! alpine! and! nordic! skiing,! snowboarding,! snowshoeing,! and! in\line! skating! products;! technical! and! outdoor! apparel!and!equipment;!personal!flotation!devices,!water!sports!equipment,!and!all\ terrain!vehicle!gears;!and!inflatable!air!beds!and!accessories.! ! Its!Consumer!Solutions!segment!provides!household!kitchen!appliances,!such!as! blenders,! coffeemakers,! irons,! mixers,! slow! cookers,! tea! kettles,! toasters,! toaster! ovens,!and!vacuum!packaging!machines;!air!purifiers,!fans,!heaters,!humidifiers!and! vacuum! cleaning! systems;! clippers,! trimmers,! and! other! hair! care! products! for! professional!use! in!the!beauty!and!barber!and!animal!categories;!electric!blankets,! mattress! pads,! and! throws;! products! for! the! hospitality! industry;! and! scales! for! consumer!use.!!!! ! The!Branded!Consumables!segment!offers!fresh!preserving!jars!and!accessories;! home!safety!products;!baby,!health,!and!home!care!products;!candle!products,!home! fragrance!products,!auto!air!fresheners,!and!home!décor!accessories;!playing!cards! and!card!accessories;!cords,!ropes,!and!twines;!foam!coolers,!reusable!ice,!protective! packaging,! and! other! recreational! products;! arts! and! crafts! products;! firelogs! and! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1!See!JAH!ACQUISITONS!tab!in!the!case!workbook!for!a!history!of!JAH!acquisitions! from!2002.! Newell Rubbermaid’s Acquisition of Jarden Corporation ! ! 2! firestarters;! and! storage! organizers! and!workshop! accessories,! doors,! and! fencing! products.! ! Its! Process! Solutions! segment! produces! plastic! products,! including! closures,! contact! lens! packaging,! football! helmets,! medical! disposables,! plastic! cutlery,! and! rigid! packaging;! specialty! nylon! polymers;! conductive! fibers;! monofilaments;! industrial! zinc! products;! and! fabricated! solid! zinc! strip! products;! and! supplies! copper\plated!zinc!penny!blanks,!as!well!as!brass,!bronze,!and!nickel\plated!finishes! on!steel!and!zinc!for!coinage.2!! ! Jarden! has! been! running! two! concurrent! strategies! to! fuel! its! growth:! acquisitions!and!product!development.!!Since!2002!JAH!as!spent!over!$9.0!billion!on! acquisitions! of! category! leading! companies! in! niche! consumer! markets! with! defensible!moats!around!the!business.! !Other!target! firm!characteristics! important! to! the! JAH! acquisition! strategy! include! recurring! revenue!with!margin! expansion! opportunities,! strong! cash! flow,! talented! management! teams,! and! attractive! valuations!with!the!potential!to!provide!material!synergies.! ! To! finance! the! two!most! recent! acquisitions! (Waddington!Group! and! Jostens),! JAH!issued!18.4!million!shares!at!$54.50/share!in!Q3!2015,!and!another!10.0!million! shares!at!$49.00/share! in!Q4!2015.! !Additionally,! JAH!borrowed!$900!million! in!a! senior!secured!loan!in!Q3!2015,!and!issued!$300!million!in!senior!notes!due!in!2023! in!Q4!2015.!!JAH!also!borrowed!$200!million!on!a!term!loan!in!the!same!quarter.! ! Jarden’s! long\term! financial! goals! presented! to! its! investors! prior! to! the! announcement!to!sell!include:3! ! ! Long\term!organic!sales!growth!of!3%!to!5%,! ! Expand!segment!earnings!margins!to!15%!by!year\end!2018,! ! Generate!annual!earnings!growth!of!at!least!10%,! ! Produce!at!least!$4.0!billion!of!cash!flow!from!operations,! ! Target!year\end!leverage!of!no!more!than!3!times!cash!flow!from!operations,! ! Deliver!adjusted!EPS!of!$4.00!by!year\end!2018.! ! At! the! time! of! the! agreement,! Franklin! stated! "We've! been! doing! this! for! fifteen! years,! we! could! have! done! it! for! another! fifteen! years,! but! the! reality! is,! the! fit's! really!good.! If!we!had!the!multiple!and!we!had!the!market!cap,!we'd!be!the!buyer.! That's! the! way! we! operate! —! we! want! to! drive! value.! ! Furthermore,! Franklin! observed:!"In!a!family!business!ownership,!you've!got!to!have!some!diversification,! that's!my!intent."4! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 2!http://finance.yahoo.com/q/pr?s=JAH+Profile,!extracted!December!28,!2015! 3!Jarden!Investor!Presentation!November!2015.! 4!Newell!Rubbermaid!to!buy!Jarden!for!$13.22!billion,!Reuters,!Monday!14!Dec! 2015.! Newell Rubbermaid’s Acquisition of Jarden Corporation ! ! 3! Newell*Rubbermaid*(NWL)* ! Newell!Rubbermaid! Inc.!was! founded! in!1903!and! is!headquartered! in!Atlanta,! Georgia.! ! The! company! manufactures! and! markets! consumer! and! commercial! products!worldwide.! ! It! operates! through! five! segments:!Writing,!Home!Solutions,! Tools,!Commercial!Products,!and!Baby!&!Parenting.! ! The! Writing! segment! offers! writing! instruments,! such! as! markers! and! highlighters,!pens,!and!pencils;!art!products;!fine!writing!instruments;!and!labeling! solutions!under!the!Sharpie,!Paper!Mate,!Expo,!Parker,!Waterman,!and!Dymo!Office! brand!names.! ! The! Home! Solutions! segment! provides! indoor/outdoor! organization,! food! storage,! and! home! storage! products;! durable! beverage! containers;! gourmet! cookware,!bakeware,!cutlery,!and!kitchen!gadgets!and!utensils;!window!treatments;! and! hair! care! accessories! under! the! Rubbermaid,! Contigo,! bubba,! Calphalon,! Levolor,!and!Goody!brand!names.! ! The!Tools!segment!offers!hand!and!power!tool!accessories;!industrial!band!saw! blades;! tools! for! HVAC! systems;! and! label!makers! and! printers! for! industrial! use! under!the!Irwin,!Lenox,!Hilmor,!and!Dymo!Industrial!brand!names.! ! The! Commercial! Products! segment! provides! cleaning! and! refuse! products,! hygiene! systems,! and! material! handling! solutions;! computer! carts;! and! wall\ mounted! workstations! under! the! Rubbermaid! Commercial! Products! and! Rubbermaid!Healthcare!brand!names.! ! Finally,!the!Baby!&!Parenting!segment!offers!infant!and!juvenile!products,!such! as!car!seats,!strollers,!highchairs,!and!playards!under!the!Graco,!Baby!Jogger,!Aprica,! and!Teutonia!brand!names.5!! ! In! 2012! Newell! Rubbermaid! implemented! their! “Growth! Game! Plan”,! a! new! multi\year! corporate! strategy! to! accelerate! into! a! bigger,! faster! growing,! more! global! and!more!profitable! company.!NWL! is! driving! its! “Growth!Game!Plan”! into! action! through! a! brand\led! strategy,! a! commitment! to! superior! products! and! differentiated!high\impact!innovation,!supported!by!an!executional!powerhouse!on! the!ground!in!countries!around!the!world.”6!!!Growth!is!derived!organically!through! product!development!and!through!acquisitions.!!Most!recently,!NWL!announced!the! acquisition!of!Elmer’s!Products!Inc.!for!approximately!$600!million!in!October!2015.!! Overall,!NWL!is!targeting!sales!growth!of!4%!to!5%.! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ! 5!http://finance.yahoo.com/q/pr?s=nwl&ql=1,!extracted!December!28,!2015! 6!http://www.newellrubbermaid.com/OurCompany/Pages/OurHistory.aspx,! extracted!December!28,!2015.! Newell Rubbermaid’s Acquisition of Jarden Corporation ! ! 4! The*Deal* ! Cost!reduction!and!complimentary!product! lines!were! the!primary!motives! for! the!deal.!! !While!both!companies!have!a!track!record!of!successful!acquisitions!and! product! development,! NWL’s! product! development! team! is! viewed! as! being! stronger,!and!in!a!position!to!add!value!to!JAH’s!portfolio!of!brands.! ! "There!are!differences!in!the!portfolios,!and!the!business!models!in!some!places,! but!there!are!also!opportunities!connected!to!those!differences,"!Polk!said.!"So!with! a! business! like! Jostens,! we! have! beautiful! fine\writing! business! with! brands! like! Parker! and! Waterman! that! would! be! perfect! graduation! gifts! through! a! Jostens! business!model.!So!there's!cross\sell!opportunities!you!don't!intuitively!think!about! until!you!start!to!unpack!this."7! Polk!further!explained!that!“scale!does!matter…it!means!we!become!a!lot!more! important! –! that! means! we! get! the! opportunity! to! have! more! long\term! conversations! about! the! categories! with! retailers,! and! it! means! we! have! the! opportunity!to!talk!to!them!how!to!build!category!with!shoppers.”8!!For!example,!the! largest! customer! for! both! NWL! and! JAH! is! Walmart.! ! Therefore,! the! combined! company!(Newell!Brands)!has!the!opportunity!to!gain!more!power!in!negotiations! related! to! pricing,! inventory,! and! product! placement.! ! Other! large! retailers! that! purchase! from! NWL! and! JAH! include! Target,! Amazon,! Carrefour,! Costco,! TESCO,! Kroger,!Lowe’s!Home!Depot,!and!Walgreens.! The! combination! is! expected! to! generate! approximately! $500! million! in! cost! saving! synergies! over! the! next! 4! years.! ! The! areas! offering!most! of! these! savings! include! expected! reductions! in! transportation! costs! for! products! and! materials! sourced! in! Asia! and! a! reduction! in! important! raw!materials! costs,! such! as! resin,! which!both!companies!consider!a!primary!manufacturing!input.! ! Transaction*Highlights* ! Jarden! shareholders!will! received! $21! in! cash! and!0.862!NWL! shares! for! each! share! of! JAH! common! stock! for! an! estimated! aggregate! value! of! $60/share! JAH! share,! representing! an! approximate! 24%! premium! over! JAH’s! 30\day! volume! weighted!average!share!price!(as!of!12/11/15).! !Newell!Rubbermaid!shareholders! will!own!approximately!55%!of!the!new!company!to!be!called!Newell!Brands.! ! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 7!Newell!Rubbermaid!to!buy!Jarden!for!$13.22!billion,!Reuters,!Monday!14!Dec! 2015.! 8!Inside!Newell!Rubbermaid’s!Blockbuster!$15.4!billion!Deal!for!Jarden,!TheStreet,! December!14,!2015.! Newell Rubbermaid’s Acquisition of Jarden Corporation ! ! 5! The! transaction!will! be! funded!with! cash! on! hand,! debt,! and! equity! issued! to! Jarden!shareholders.!!!Following!the!acquisition,!the!Newell!Brands!will!manage!its! leverage! to!historical! levels! to!maintain! its! investment!grade!bond! rating.! !Newell! Brands!also!expects!to!maintain!Newell!Rubbermaid’s!dividend.! ! JAH!has!a!no\shop!provision!with!a!“fiduciary!out,”!indicating!that!it!cannot!talk! to! other! potential! acquirers!while! the! transaction! is! pending.! ! However,! JAH!may! talk! to!prospective!buyers!who!make!unsolicited,!bona! fide!offers.! ! If!one!of! these! offers!is!accepted,!JAH!will!owe!NWL!a!termination!fee!of!$385!million.! ! Michael!B.!Polk!will!become! the!CEO!of!Newell!Brands!and!Michael!T.!Cowhig,! currently!the!non\executive!Chairman!of!Newell!Rubbermaid,!will!become!the!non\ executive!Chairman!of!a!thirteen!member!Newell!Brands!Board!of!Directors.!!Martin! E.! Franklin,! Founder! and!Executive!Chairman!of! Jarden,! and! Ian!G.!H.!Ashken,!Co\ Founder,!Vice!Chairman!and!President!of!Jarden,!will!join!the!Board!of!Directors!of! Newell!Brands.! ! As!a!result!of! the!deal,!Mr.!Franklin!will!receive!$142!million! in!cash!and!$245! million!worth!of!shares!in!Newell!Brands.! !Mr.!Franklin!could!also!receive!as!much! as!$132!million!in!cash,!stock,!and!other!benefits!if!his!contract!isn’t!renewed!within! two! years! after! the! deal! closes.! ! Analysts! feel! that! this! contract! is! likely! to! be! triggered,!although!the!contract!could!be!renegotiated!as!part!of!the!deal.9!!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9!Newell!Rubbermaid!to!Acquire!Jarden!for!$15!Billion,!Wall!Street!Journal,! December!14,!2015.! Newell Rubbermaid’s Acquisition of Jarden Corporation ! ! 6! Questions* ! 1. What! is! the! strategy! driving! the! combination! of! Newell! Rubbermaid! and! Jarden!Corporation?!!Are!both!companies!equally!positioned!to!benefit!from! the!combination?! ! 2. What!are! the!consequences!Newell’s!acquisition! financing!choices?! !Do!you! believe!NWL!is! financing!the!acquisition!of! JAH!for! the!maximum!benefit!of! its!shareholders?!!Why!or!why!not?! ! 3. Based!on!your!assessment!of!the!market’s!response!to!the!announcement!of! the!combination,!what!is!the!value!of!the!anticipated!synergies?! ! 4. What!is!the!maximum!offer!NWL!should!make!to!acquire!JAH?! ! 5. As! a! shareholder! of! Jarden! Corporation,!would! you! tender! your! shares! for! $60?!!If!not,!what!is!the!minimum!acceptable!price!for!your!shares?! NWL Analysis Newell Rubbermaid, Inc. (NYS: NWL) Millions As Reported Annual Income Statement Common Sized Income Statement Report Date2000200120022003200420052006200720082009201020112012201320145-yr CAGR10-yr CAGR14-yr CAGR200020012002200320042005200620072008200920102011201220132014MeanMedianCV Net sales6,934.76,909.37,453.97,750.06,748.46,342.56,201.06,407.36,470.65,577.65,759.25,864.65,902.75,692.55,727.00.53%-1.63%-1.36%1.001.001.001.001.001.001.001.001.001.001.001.001.001.001.00 Cost of products sold5,103.25,046.65,394.25,682.84,857.94,448.14,131.04,150.14,347.43,528.13,588.43,659.43,673.63,514.33,523.6-0.03%-3.16%-2.61%0.740.730.720.730.720.700.670.650.670.630.620.620.620.620.620.670.670.0719 Gross margin1,831.61,862.72,059.72,067.21,890.51,894.42,070.02,257.22,123.22,049.52,170.82,205.22,229.12,178.22,203.41.46%1.54%1.33%0.260.270.280.270.280.300.330.350.330.370.380.380.380.380.380.330.330.1467 Selling, general & administrative expenses606.8839.51,026.61,074.71,020.71,051.81,153.71,253.91,319.41,199.51,291.11,353.71,357.41,287.21,324.42.00%2.64%5.73%0.090.120.140.140.150.170.190.200.200.220.220.230.230.230.230.180.200.2539 Depreciation & amortization292.6328.8280.7278.2249.1213.8193.3177.0183.3175.1172.3161.6163.7158.9156.10.040.050.040.040.040.030.030.030.030.030.030.030.030.030.030.030.030.1864 Operating income (loss)932.2694.5752.4714.3620.7628.8723.0826.3620.5674.9707.4689.9708.0732.1722.91.38%1.54%-1.80%0.130.100.100.090.090.100.120.130.100.120.120.120.120.130.130.110.120.1302 Interest expense130.0137.5110.6140.1119.3127.1132.0104.1137.9146.3121.988.480.462.364.30.020.020.010.020.020.020.020.020.020.030.020.020.010.010.010.020.020.2349 Interest income0.00.00.00.00.00.00.00.00.06.33.52.24.32.03.90.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.001.4281 Impairment charges0.00.00.0289.4374.034.40.00.0299.40.00.0382.60.00.00.00.000.000.000.040.060.010.000.000.050.000.000.070.000.000.000.010.001.7058 Restructuring costs48.666.7122.7245.052.172.266.486.0120.3100.077.550.156.1111