Spectrum Brands Holdings’ $10 Billion Combination with HRG Group

Moelis & Company LLC is serving as financial advisor to the Special Committee and Kirkland & Ellis LLP and Cleary Gottlieb Steen & Hamilton LLP are serving as its legal advisors. J.P. Morgan Securities LLC and Jefferies LLC are serving as financial advisors to HRG and Davis Polk & Wardwell LLP is serving as its legal advisor.

Spectrum Brands Holdings, Inc. (NYSE: SPB) and HRG Group, Inc. (NYSE: HRG) have entered into a definitive merger agreement pursuant to which Spectrum Brands will combine with HRG. As a result, HRG’s shareholders will effectively hold HRG’s interests in Spectrum Brands directly following the combination. The transaction has been unanimously recommended by the Special Committee of independent directors of the Spectrum Brands Board of Directors (the “Special Committee”), and was also approved by the Spectrum Brands and HRG boards.

Under the terms of the agreement, immediately prior to closing, HRG will effect a reverse stock split such that HRG shareholders receive in the aggregate a number of shares of the combined company equal to the number of shares of Spectrum Brands currently held by HRG, subject to certain adjustments to account for HRG’s net debt and transaction costs as well as a $200 million upward adjustment. The $200 million upward adjustment takes into account that the combination transforms Spectrum Brands into an independent public company with no controlling shareholder and a widely held shareholder base as well as certain favorable tax attributes of HRG. Upon closing, Spectrum Brands shareholders will receive one newly issued share of the combined company for each share of Spectrum Brands that they owned prior to the combination. The transaction is expected to be tax free to Spectrum Brands and Spectrum Brands shareholders, and to HRG and HRG shareholders.

Following the transaction, the current Spectrum Brands management team will lead the combined company. In addition, HRG’s board will be replaced by the Spectrum Brands board. Ehsan Zargar will resign from the Spectrum Brands board and will be replaced by an independent director to be selected by Leucadia National Corporation (“Leucadia”), HRG’s largest shareholder. Leucadia also has an ongoing right to designate one director, so long as it owns at least 10% of the number of combined company’s shares issued and outstanding as of the closing, which is initially expected to be the current Spectrum Brands’ director and Leucadia’s Chairman, Joseph Steinberg. Pro forma for the reverse stock split, the merger and the adjustments described above, Leucadia is expected to hold approximately 13% of the combined company and another 45% of the combined company is expected to be widely held by HRG’s legacy stockholders. Such ownership percentages assume approximately $324 million of HRG’s net debt at closing and are based on the number of shares outstanding and market prices as of February 22, 2018 (but are subject to adjustment for HRG’s actual amount of net debt, transaction costs and outstanding shares at closing).

The combined company will be named Spectrum Brands Holdings, Inc. and will trade under the ticker “SPB.” The company will remain headquartered in Middleton, Wisconsin.

Spectrum Brands Holdings, a member of the Russell 1000 Index, is a global and diversified consumer products company and a leading supplier of consumer batteries, residential locksets, residential builders’ hardware, plumbing, shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden and home pest control products, personal insect repellents, and auto care products. The company, led by David M Maura, Andreas Rouve and Guy J Andrysick, in 2017 recorded $5.007 billion revenues.

HRG Group, Inc. is a holding company that conducts its operations through its operating subsidiaries. The company is based in NY.

Kirkland & Ellis LLP advised the Special Committee of Spectrum Brands Holdings, Inc. with a team including corporate partners Sarkis Jebejian (Picture), Jonathan Davis and Patrick Jacobs and associate Erika Lopez; tax partners Dean Shulman and Benjamin Schreiner; and capital markets partners Joshua Korff and Ross Leff.

Davis Polk is advising HRG Group Inc. with a team including John H. Butler, Evan Rosen, Theodore A. Weisman (M&A), David H. Schnabel, Patrick E. Sigmon, M. Brett Cameron (Tax), John B. Meade (Capital Market), Lawrence Portnoy (Dispute Resolution), Ron M. Aizen (Employment).

 

Involved fees earner: John Butler – Davis Polk & Wardwell; Evan Rosen – Davis Polk & Wardwell; Theodore Weisman – Davis Polk & Wardwell; David Schnabel – Davis Polk & Wardwell; Patrick Sigmon – Davis Polk & Wardwell; Brett Cameron – Davis Polk & Wardwell; John Meade – Davis Polk & Wardwell; Lawrence Portnoy – Davis Polk & Wardwell; Ron M. Aizen – Davis Polk & Wardwell; Sarkis Jebejian – Kirkland & Ellis; Jonathan Davis – Kirkland & Ellis; Patrick Jacobs – Kirkland & Ellis; Erika Lopez – Kirkland & Ellis; Dean Shulman – Kirkland & Ellis; Benjamin Schreiner – Kirkland & Ellis; Joshua Korff – Kirkland & Ellis; Ross Leff – Kirkland & Ellis;

Law Firms: Davis Polk & Wardwell; Kirkland & Ellis;

Clients: Spectrum Brands Holdings; HRG Group inc.;

 

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Author: Ambrogio Visconti