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Assa Abloy buys Spectrum home improvement business for $4.3 billion

Stock MarketsSep 09, 2021 03:45AM ET
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© Reuters. The logo for Spectrum Brands Holdings, Inc., is displayed screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 6, 2018. REUTERS/Brendan McDermid

By Helena Soderpalm and Praveen Paramasivam

(Reuters) - U.S. lockmaker Spectrum Brands Holdings (NYSE:SPB) Inc has agreed to sell its hardware and home improvement division to Swedish rival Assa Abloy (OTC:ASAZY) for $4.3 billion in cash.

Shares in Assa Abloy rose 6.2% in early trade on Thursday, buoyed by the deal and the prospects for expansion beyond its commercial business in North America into the residential market.

Assa, the world's biggest lockmaker, expects operating earnings benefits from the deal to reach around $100 million in 2025, it said in a statement.

The deal, expected to close in the fourth quarter, would immediately add about 14% to Assa's consolidated sales, which were 88 billion crowns ($10.2 billion) in 2020.

"In summary, a great addition to Assa Abloy Group; really the missing piece for us in the Americas and in North America, the U.S. in particular," CEO Nico Delvaux told analysts and reporters.

Investment bank Jefferies (NYSE:JEF) said the deal multiples were sensible.

"We see strong strategic rationale behind the deal, as it enables Assa to strengthen its position in the North America residential market," it said.

Shares in Spectrum had risen 18% on Wednesday after the company said it would use the proceeds to reduce debt and make complementary acquisitions.

The deal will also allow Spectrum to sharpen its focus on its pet care, home and garden and personal care businesses, with Chief Executive David Maura saying the downsized company would have higher growth rates and strong margins.

Spectrum's California-based hardware and home improvement division houses brands such as Kwikset, Baldwin and Weiser.

Demand for home improvement products has soared during the COVID-19 pandemic as people largely worked from home during the health crisis.

Net sales at Spectrum's hardware and home improvement unit increased 48.8% from a year earlier to $419 million in the third quarter ended July 4, boosted by new products.

($1 = 8.6344 Swedish crowns)

Assa Abloy buys Spectrum home improvement business for $4.3 billion
 

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