Newell Sells Pure Fishing & Jostens, Transformation Underway
Zacks Investment Research | Dec 24, 2018 07:26AM ET
Newell Brands Inc. (NASDAQ:NWL) is progressing well with its Accelerated Transformation Plan as clear from the recently completed sale of Pure Fishing and Jostens businesses for gross proceeds of nearly $2.6 billion. The Pure Fishing business — which provides fishing tackle, lures, rods and reels — was sold to Sycamore Partners. This business includes brands like Abu Garcia, All Star, Berkley, Chub, Fenwick, Greys, Hardy, Hodgman, Johnson, JRC, Mitchell, Penn, Pflueger, Sebile, Shakespeare, SpiderWire, Stren and Ugly Stik.
Additionally, the company is likely to conclude the sale of Jostens to Platinum Equity. This business comprises products like yearbooks, publications, jewelry and consumer goods, which are used by K-12 educational, college and professional sports segments.
The company is likely to receive net proceeds of about $2.5 billion after-tax. Proceeds from the sale of these assets will be directed to lower balance sheet debt as well as for share repurchases.
Newell’s Transformation Plan focuses on creating a simpler, faster and stronger consumer-focused portfolio of leading brands. The key aspects of the Transformation Plan are restructuring the company into a global consumer product entity valued at more than $9 billion, with major brands in seven consumer segments.
As part of its portfolio management efforts, Newell makes prudent investments in areas with higher growth potential and divests underperforming and non-core assets. The company is divesting its non-core brands to reshape its portfolio and improve operational efficiency. Recently, it concluded three divestitures — including The Waddington Group, Rawlings Sporting Goods Company and Goody Products — for about $2.6 billion of after-tax proceeds. Further, it is exploring strategic alternatives for businesses such as Consumer & Commercial Solutions, and Process Solutions, Team Sports, Beauty, U.S. Playing Cards.
All these businesses — including Waddington Group, Jostens and Pure Fishing — account for roughly 35% of the company's net sales. It expects these divestitures to be completed by the end of 2019. Management continues to anticipate generating roughly $10 billion in net proceeds from these divestitures. These proceeds will be used for lowering debt and making share repurchases while retaining investment grade rating and an annual dividend of 92 cents per share through 2019, targeting 30-35% payout ratio.
Despite the positive news, shares of Newell dipped 5.8% on Dec 21. Moreover, this Zacks Rank #3 (Hold) stock has lost 19.8% in a month, much wider than the industry ’s 5.4% decline. This underperformance can be attributed to Newell’s lower-than-expected top-line performance in third-quarter 2018. Though Newell delivered earnings beat in the third quarter, top line missed estimates for the third straight quarter.
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