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By Siddharth Cavale
April 30 Energizer Holdings Inc said it
plans to separate into two publicly traded companies, one for
batteries and other household products and the other for
personal care brands such as Schick razors and Stayfree female
Shares of the company, known for its Energizer and Eveready
batteries, jumped more than 17 percent in morning trading.
Energizer said it expects the separation to help the
businesses intensify focus on commercial priorities and better
"We're surprised by the decision to split the company, but
think it makes sense," BMO Capital Markets analyst Connie
Maneaty said. "The personal care segment may realize a higher
valuation if it is not bound to the battery business."
The households products business's contribution to
Energizer's revenue declined from 70 percent in 2006 to 45
percent last year.
Battery sales have declined amid increasing competition and
growing demand for rechargeable batteries used in mobile
Household product sales fell 15.8 percent to $373.4 million,
mainly due to the loss of two U.S. retail customers and higher
promotional spending, in the second quarter ended March 31.
Larger rival Procter & Gamble Co, home to Duracell
batteries and Gillette razors, is also trying to streamline its
businesses. The company said earlier this month that it would
sell its pet food business to Mars Inc for $2.9 billion.
The loss of two big U.S. retail customers, whom Energizer
didn't name, will hurt sales by 6 percent each in the first
three quarters of 2014, the company said.
Energizer shut manufacturing facilities, cut input expense
and fired staff under a cost-saving program last year.
The company said on Wednesday the cost-cutting will continue
through the separation process.
Energizer expects the personal care business, which also
makes Wilkinson Sword shavers and Banana Boat sunscreen, to be a
consumer product company aimed at growing through scale and
The business reported revenue of about $2.6 billion in the
year to March 31 and current Chief Executive Ward Klein is
slated to be the executive chairman of the business.
The sum-of-the-parts multiple of Energizer's businesses is
about 9.5 times - 15 percent higher than its current enterprise
value multiple of 8.3 times forward EBITDA, Bernstein research
analyst Ali Dibadj said.
"This split may provide further operational benefits and
increases the chance of mergers and acquisitions," he added.
The planned tax-free spin-off is expected to be completed in
the second half of the year ending September 2015.
The company expects the household products business, which
brought in $1.9 billion in revenue in the year ended March 31,
to generate strong margins and cash flows.
Alan Hoskins, the chief executive of Energizer Household
Products, will continue to lead the business post-split.
Energizer also reported that its second-quarter net income
rose 16 percent to $98.5 million, or $1.57 per share. Excluding
items, it earned $1.88 per share.
Sales fell 3.1 percent to $1.06 billion. Personal care sales
rose 5.6 percent to $689 million, benefiting from its
acquisition of the feminine care business from Johnson & Johnson
Analysts on average had expected earnings of $1.71 per share
on revenue of $1.08 billion, according to Thomson Reuters
Energizer shares were up 16 percent at $113.37 on the New
York Stock Exchange on Wednesday.
The stock has risen 2.2 percent in the year to Tuesday's
close, lagging the wider S&P 500 Index which has risen
17.87 percent in the same period.
(Editing by Joyjeet Das)