Middleton-based Spectrum Brands Holdings said Wednesday it will “explore strategic options” for selling its batteries and appliances businesses in 2018, a move that could sell off the Rayovac battery business that started in Madison more than 100 years ago and was the legacy core of the global consumer products company that Spectrum Brands has become.
If that happens, a lot of jobs could be affected, in one way or another.
Spectrum Brands, with 18,000 employees worldwide, has 1,200 employees in Wisconsin: 670 at its Middleton headquarters, including 400 in the batteries and appliances division, and more than 500, in total, at two battery plants.
Spectrum Brands spokesman Dave Prichard said it’s too soon to speculate about the potential impact on jobs.
“We don’t have a contract with a buyer; we are in exploratory discussions. The impact might vary depending on who the buyer is,” Prichard said.
He said, though, employees in Middleton may be among those affected. “There, potentially, could be (an impact), but it’s premature to be able to comment on that with any specificity.”
Tom Pyle, the Madison-area businessman credited with recharging Rayovac in the 1980s and early 1990s when he and his then-wife, Judy, were majority owners, said he hopes the business stays in the state.
“If it is sold, I would hope that … whoever buys it has a headquarters in Wisconsin,” Pyle said.
Sales of the division’s products — including batteries, shavers and George Foreman grills — are steady but slow, Spectrum Brands said.
Executive chairman David Maura said the company can pump money instead into the “faster-growing and higher-margin” divisions it has acquired since 2005: pest and weed sprays, pet supplies, auto care products, locks and plumbing products.
“We believe this strategy is aligned with investors’ interests and will drive shareholder value to the next level,” Maura said. “With greatly increased financial flexibility from these planned divestitures, we intend to reduce debt, reinvest in our core businesses both organically and through acquisitions, and repurchase shares.”
Prichard said the Spectrum Brands board voted in late 2017 to look into the possibility of selling the division.
“We have received multiple inquiries from prospective buyers and are in active discussions with several,” CEO Andreas Rouvé said. “Given their attractiveness and upside potential, we believe these businesses can have accelerated success in the hands of new owners.”
Wall Street reacted favorably to the news. Spectrum Brands stock closed Wednesday at $118.94 a share, up $9.58, or 8.8 percent, from its close Tuesday at $109.36.
At least two research analysts applauded the move in notes issued Wednesday.
Such a sale “should improve (sales) margins and sharpen focus,” analyst Joseph Altobello, of Raymond James, titled a research note.
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The strategy is “long overdue,” headlined a note by Ian Zaffino, of Oppenheimer & Co.
The global batteries and appliances division brought in just under $2 billion for the 2017 fiscal year, or 40 percent of Spectrum Brands’ $5 billion revenue in fiscal 2017.
Starting with financial results for the fiscal 2018 first quarter that ended Dec. 31, that division will be reclassified as held for sale and reported as discontinued operations.
Long history in Madison
Rayovac got its start as the French Battery Co., founded in Madison in 1906.
In its early years, there were two battery plants in Madison and later, the company added factories in cities including Appleton and Wonewoc. Those plants eventually closed; the last battery manufacturing in Madison ended in 1998.
Rayovac has two remaining factories in Wisconsin. In Fennimore, nearly 300 employees make AA and AAA alkaline batteries. In Portage, 225 employees produce hearing aid batteries.
In fact, even as Spectrum Brands announced the prospect of selling the battery business, the company said it is introducing a new line of hearing aid batteries, called PRO LINE Advanced, that will last longer and be easier to handle. They will be made in Portage.
It wasn’t until the early 2000s that Rayovac diversified into other industries, beyond batteries and flashlights.
The company bought Remington Products, with electric shavers and hair care appliances, in 2003, then added United Industries Corp., a lawn care and pet supplies company, in 2005 and changed its name to Spectrum Brands. The George Foreman and Black & Decker small kitchen appliances were acquired in 2010, hardware businesses came on board in 2012 and 2014, and Armored AutoGroup joined Spectrum Brands in 2015.
The company, housed for decades on Madison’s West Side, moved into new offices at 3001 Deming Way, Middleton, in 2013 and the building was expanded by 30,000 square feet last year.
Spectrum Brands stock is publicly traded on the New York Stock Exchange, but its majority owner, HRG Group, a publicly traded New York diversified portfolio holding group, owns 59.6 percent of the shares, according to a December 2017 filing with federal regulators.
Raymond James analyst Altobello said he thinks the batteries and appliances divisions could sell for $3.1 billion to $3.5 billion, and parts would likely go to separate buyers, possibly competitors or private equity investors.
“I think Rayovac has kept up in terms of technology, but it’s a tough industry to differentiate,” Altobello said.
Oppenheimer’s Zaffino said he thinks the deal could bring Spectrum Brands $2.9 billion to $3.2 billion and will let management “focus growth efforts on its better businesses.”
Pyle, chairman of The Pyle Group, said he is not interested in buying back the company.
Spectrum’s Prichard said the division is valuable to the company. “Everyone is very mindful of the long, long history of Rayovac and the battery business in Madison ... and its steady contribution to the company’s growth,” he said.
Prichard said there’s no timetable for a decision on the possible sale.
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