The sale of its automotive care products makes "strategic sense" for Clorox Co., an analyst said Monday, four months after the consumer products company said it was exploring strategic options for the brands.
THE OPINION: Jefferies & Co. analyst Douglas M. Lane said in a note to investors that Clorox's sale of its Armor All and STP brands could dilute its earnings because the brands are "highly profitable." But a sale would make sense given Clorox's strategic focus.
Bloomberg News reported on Monday that Clorox is close to a deal to sell Armor All and STP to a private equity firm for $750 million to $800 million. A Clorox spokesman could not immediately be reached for comment.
Clorox announced in May it was exploring options for the brands because the Oakland, Calif., company wants to focus more closely on other consumer trends such as health and wellness. Clorox makes its namesake cleaning products as well as Fresh Step cat litter and Kingsford charcoal.
"The divestiture of these brands makes strategic sense to us. In addition, we believe that the auto care business is more cyclical/discretionary than most of the other categories in the Clorox portfolio," Lane said.
Lee left his "Hold" rating and $67.50 price target on the company's stock unchanged.
THE STOCK: Shares of Clorox rose $1.02 to $67.67 in morning trading after touching a 52-week high of $67.73. The stock has traded between $56.36 and $67.72 in the year.