Jarden Corporation, the company behind several household consumer brands such as Bicycle playing cards and FoodSaver vacuum food storage devices, has acquired all of the assets and assumed all debt of Colemans parent company, American Household. Jarden paid $745.6 million in cash and assumed an estimated $130 million in debt bringing total consideration to roughly $875.6 million.
The new combined company will have roughly $2.6 billion in annual revenue, whereas previously annual revenues were in the $900 million range.
The final sale price is roughly 7.4 times EBITDA and 0.5 times sales. The acquisition is expected to be immediately accretive to earnings when it closes in early 2005.
In connection with the acquisition, Warburg Pincus, the global private equity firm, will invest $350 million of equity into Jarden in return for a 29% stake in the company. Jarden said that this P.E. funding will keep its debt down low enough to allow future acquisition should the opportunity arise.
Jarden is primarily involved in household leisure activities and appliances, so the addition of the Coleman brand is diversifying and adding a completely new arm to the company. Coleman and Camping Gaz will now be reported as their own business segment under the new Outdoor Solutions division of Jarden.
Historically, American Household has not always been a solid performer, and has seen its fair share of scandal. The company recently emerged from a very prolonged bankruptcy which lowered its debt considerably. Martin Franklin, Chairperson and CEO of Jarden, told analysts during a conference call that the company has had a “very interesting management history,” and “financial chicanery or fraud or whatever you want to call it,” had led to shortfalls in the bottom line in the past.
Mr. Franklin also told analysts that last year Coleman had around $800 million in sales with 40% of that derived from the EU and Japan. EBITDA for the entire American Household company was $118 million and said to range from 5% to 7%, depending on the company segment. Franklin said Coleman “has yet to realize” many of the restructuring benefits following the bankruptcy, but has started moving some of its production overseas to boost margins.
Jarden management expects this new sourcing structure to become a substantial boost to profits in the coming years.
The company also sees considerable potential for efficiencies, including “a fairly big dent” in the $30 million logged for corporate head office expenses at American Household last year. Jarden will also be taking advantage of cross selling opportunities like packaging diamond brand flame products (matches and lighters), Bicycle playing cards, and various Coleman outdoor products into holiday gift boxes.
Mr. Franklin said several times throughout the conference call that he sees the camping and sporting goods market as the number one growth prospect for his company right now.
Jarden appears to have a very strong and focused management team behind its brands. Fortune magazine recently named it #19 in the publications 100 fastest growing companies list due to a three-year EPS growth of 99%. Others have credited Mr. Franklin and his team with doing “an amazing job” at acquiring companies, restructuring them and creating value.
Franklin said that while Coleman and American Household do not currently meet the companys 15% EBITDA target, he expects this key metric to rise into the 10% range in the near term and total company EBITDA to reach 15%, or roughly $400 million, within three years.
Jarden seems to be positioning itself as a one-stop shop for the big box retailers like Wal-Mart, Target, and K-Mart with a very broad assortment of consumer products including everything
