ASSA ABLOY has signed a definitive agreement to acquire the Hardware and Home Improvement (HHI) division of Spectrum Brands (SPB) for a purchase price of MUSD 4,300 on a cash and debt free basis.
Spectrum Brands’ Hardware and Home Improvement (HHI) division is a renowned provider of security, plumbing, and builders’ hardware products to the North American residential segment, with a diversified product offering of locksets, faucets, and builders´ hardware.
Hardware and Home Improvement
Hardware and Home Improvement has a varied portfolio of innovative products, including patented SmartKey technology
Hardware and Home Improvement (HHI) has a varied portfolio of innovative products, including patented SmartKey technology and electronic, smart and biometric locks. Key brands include Kwikset, Baldwin, Weiser, Pfister and National Hardware.
HHI has strong, established relationships with a variety of customers, including large home improvement centers, wholesale distributors, home builders, online retail channels and home automation providers.
For the fiscal year ending September 2020, HHI’s net sales were MUSD 1,342, with adjusted EBITDA margin of around 19%. HHI is headquartered in Lake Forest, California, with some 7,500 employees worldwide and has manufacturing facilities in the United States of America, Mexico, Taiwan, China and the Philippines.
Transformation from mechanical to digital solutions
“HHI is an excellent addition to the ASSA ABLOY Group and constitutes an important strategic step in developing our residential business in North America. This acquisition advances our strategy to strengthen our position, by adding complementary products to the core business and it will further accelerate the transformation from mechanical to digital solutions,” said Nico Delvaux, President and Chief Executive Officer (CEO) of ASSA ABLOY.
Nico Delvaux adds, “I look forward to welcoming HHI and all of its employees into the ASSA ABLOY Group.”
Lucas Boselli, Executive Vice President of ASSA ABLOY and Head of the Americas Division, said “The acquisition of HHI brings strong, well-known brands and high-quality, innovative products to the residential portfolio for ASSA ABLOY in North America, complementing our current business with a passionate and experienced team.”
Technology platform and innovation focus
Lucas Boselli adds, “Our technology platform and innovation focus supplements HHI’s current offerings and provides an exciting opportunity for us to deliver superior value to consumers.”
“After stewarding this asset for the past decade, the Board of Directors and I are confident that ASSA ABLOY is uniquely positioned to take our HHI business and team members to the next level of performance and achievement. I am personally excited to see the innovation and exciting new products that this transaction will unlock for future generations,” said David M. Maura, Executive Chairman and Chief Executive Officer (CEO) of Spectrum Brands Holdings Inc.
Background of the HHI acquisition
HHI complements ASSA ABLOY, in terms of both product offering and geographic scope
ASSA ABLOY has tremendous respect for the achievements of HHI, which is a great company with a proven track record. HHI complements ASSA ABLOY, in terms of both product offering and geographic scope, with well-known brands, a strong culture and values, high quality products and skilled employees, managed by a professional team.
HHI constitutes a strategically important step in developing ASSA ABLOY’s residential business in North America, supplementing the company’s strong reputation for innovation on the commercial side. HHI brings a deep knowledge of the residential business and adds complementary products, technology and solutions.
Major consumer brands added to portfolio
HHI adds established consumer brands in North America, including Kwikset, Baldwin, Weiser, Pfister and National Hardware, to our brand portfolio. ASSA ABLOY can bring technological innovation to consumers, which are using HHI’s access to new retail channels, such as home builders and DIY retail. HHI’s large installed base and great consumer reputation provides an excellent opportunity, to grow their electro-mechanical and digital access solutions.
HHI has a long track record of innovation, especially within SmartKey technology, which will complement ASSA ABLOY´s offering. ASSA ABLOY expects strong synergies, the largest components being their increased product offering, advances in technology, distribution and procurement. The EBIT synergies are expected to reach around MUSD 100 in 2025.
Focus on residential space in North America
HHI focuses on the residential space in North America, which is highly attractive, underpinned by favorable macro trends, such as recent strong home sales, housing starts, an aging housing stock and increased consumer focus on home repair and re-modeling.
HHI will become part of the Opening Solutions Americas Division of ASSA ABLOY.
Financing of the acquisition and financial terms
ASSA ABLOY maintains its commitment to a strong investment grade credit rating profile
The transaction will be fully funded by existing cash and new debt. ASSA ABLOY maintains its commitment to a strong investment grade credit rating profile. The total consideration for the acquisition of HHI amounts to MUSD 4,300, on a cash and debt free basis.
For the fiscal year ending September 2020, HHI’s net sales were MUSD 1,342, with adjusted EBITDA margin of around 19%. Based on publicly available financial information for 2020, for both HHI and ASSA ABLOY, the acquisition of HHI will add around 14% to ASSA ABLOY´s consolidated sales. The operating margin effect for ASSA ABLOY is initially expected to be dilutive. The acquisition will be accretive to EPS from the start.
Total purchase price of MUSD 4,300 reflects a multiple of 14x expected fiscal year 2021 (30 September), adjusted EBITDA of the HHI segment. The purchase price net of the present value of tax benefits represents a multiple of approximately 10x adjusted EBITDA, including synergies.
Conditions for the transaction
The transaction is conditional upon regulatory approval and customary closing conditions, and is expected to close during the fourth quarter of 2021. ASSA ABLOY has agreed to pay a termination fee of MUSD 350 in certain circumstances, if the transaction agreement would be terminated and required regulatory approvals would not have been obtained.
ASSA ABLOY is being advised by BofA Securities as exclusive financial advisor, and Linklaters LLP and Hogan Lovells as legal advisors. A conference call will be held at 08:00 am (CET), on Thursday, September 9, 2021. During the conference call, ASSA ABLOY´s President and Chief Executive Officer (CEO) - Nico Delvaux, the Chief Financial Officer (CFO) - Erik Pieder and the Head of the Americas Division - Lucas Boselli will describe the acquisition and respond to questions related to the transaction deal.