Advertisement
News
Advertisement

Clorox sells auto care business for $780 million

Tue, 09/21/2010 - 8:13am
The Associated Press

Clorox Co. will sell the division that makes car-care brands such as Armor All and STP to a private equity firm for $780 million in cash.

The company announced the deal Tuesday with Avista Capital Partners. The private equity firm will get the well-known brands, sold primarily in the U.S., Australia, Canada and Europe.

Clorox announced in May it was exploring options for the business, which had $300 million in sales last year — about 5 percent of total revenue.

Clorox makes its namesake cleaning products as well as Fresh Step cat litter, Kingsford charcoal and Hidden Valley Ranch salad dressing. The company, based in Oakland, Calif., had said at the time it wanted to focus more on those businesses.

Shares hit a 52-week high of $67.86 on Tuesday after the deal was announced but moderated later in the day. By midday shares fell 53 cents to $67.08.

The deal is subject to regulatory and other approvals and is expected to close by the end of the year. It includes two plants, one Painesville, Ohio with 70 employees, and one Wales, in the U.K., with 24. Overall, about 160 employees are affected by the sale.

Clorox said it expects the deal will cut earnings by about 20 to 25 cents per share in the current fiscal year.

The company plans to update its fiscal 2011 financial outlook when it reports first-quarter results in early November.

Clorox anticipates it will use net proceeds from the sale to buy back shares.

Jefferies & Co. analyst Douglas M. Lane said that the brands are profitable and have strong market share. He told clients in a note Monday, when reports of a possible deal surfaced, that the sale makes sense for the company's strategy of focusing on health and wellness and sustainability, all important to shoppers right now.

He also noted that the auto care business was seen as more discretionary than other businesses, meaning it's something shoppers cut spending on as opposed to other, more necessary items.

Avista, which has offices in New York and Houston, has holdings in energy, health and media.

Advertisement

Share this Story

X
You may login with either your assigned username or your e-mail address.
The password field is case sensitive.
Loading