Newell Rubbermaid Inc. NWL, the manufacturer of Sharpie pens and Rubbermaid containers, declared the pricing of senior notes worth $600 million for a public offering. The debt will be issued in two parts ??? $300 million senior notes due 2018 and $300 million senior notes due 2025.
The senior notes due 2018 carry a coupon rate of 2.15% p.a. and will mature on Oct 15, 2018, whereas the senior notes due 2025 will mature on Nov 1, 2025 and pay interest at the rate of 3.9% p.a. Interest on the 2018 notes will be paid semi-annually on Apr 15 and Oct 15 of every year starting Apr 15, 2016. Interest on the 2025 notes will also be paid semi-annually on May 1 and Nov 1 of every year starting May 1, 2016. The offering is scheduled to close on Oct 19, 2015.
The company intends to use the net proceeds from this issuance to fund its pending acquisition of Elmer’s Products, Inc. as well as for general corporate purposes.
Borrowing costs are still considerably low in the U.S., which enables companies to obtain easy financing. Corporate bonds and borrowings from banks are in high demand as the U.S. treasuries are yielding low rates. We believe that this strategic move by the company will provide it the financial flexibility to drive long-term growth.
Regarding the Elmer acquisition, we note that on Oct 5, 2015, Newell penned a deal to buy the former from a partner of Berwind Corporation, an investment management company. Newell will pay $600 million for Elmer, a producer of adhesive and cutting products that are used for creative activities in classroom, at home or elsewhere.
Elmer’s owns popular arts and craft brands like Elmer’s, Krazy Glue, and X-Acto, which will strengthen Newell’s existing product line that primarily caters to the Back-to-School selling season. Following the acquisition, which is expected to close by end of 2015, Elmer’s leading brands will join Newell’s Paper Mate, Expo and Mr. Sketch brands that form a part of its Writing segment.
This acquisition will not only enhance Newell’s Back-to-School offerings but will also deliver synergies in distribution, cross-selling and merchandising. Newell expects the acquisition to reflect in its earnings and operating margin in 2016.
Newell currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same industry include CVSL Inc. CVSL and Ollie's Bargain Outlet Holdings, Inc. OLLI. Both stocks carry a Zacks Rank #2 (Buy). Another stock in the broader consumer staples sector that is worth considering is Helen of Troy Limited HELE, holding a Zacks Rank #2.
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