The proxy fight for Newell Brands' control is over, but there is strong speculation among financial analysts that the new board of directors that will come out of it will authorize the divestiture of Coleman, Marmot Mountain, Pure Fishing, Shakespeare and other brands in its outdoor group. These brands previously belonged to the former Jarden Corporation, and some of its former directors may be candidates to their acquisition.
The proxy battle had in fact been initiated by Mike Franklin and other members of the Jarden gang that sold their business to Newell in 2015 for $17.4 billion. Criticizing the way in which their integration was being conducted by Newell's current management, Franklin resigned from Newell's board earlier this year and set up a company with other former Jarden executives, Starboard Value, proposing the nomination of many directors of their choice at the annual shareholders' meeting slated for May 5.
Based on a last-minute settlement brokered by one of the group's biggest shareholders, Carl Icahn, Newell's board will be expanded from 11 to 12 directors, and nine of them will be new. Icahn and Starboard will each have three board seats. Icahn, who has a stake of about 7 percent in the group, had recently reached an agreement with Newell's management that would have let him appoint four directors to the board. In the end, two representatives of Starboard will take the place of two of Icahn's appointees. Icahn will still nominate the group's chairman.
To help reduce the huge debt accumulated through its merger with Jarden, Newell has already shed many assets including Jarden's former winter hardgoods business, consisting of K2, Völkl and other brands, which fetched proceeds of $240 million. Last January, Newell's embattled chief executive, Michael Polk, said the group was going to sell several other businesses including Rawlings, which was another former property of Jarden, and Rubbermaid Outdoor in a bid to generate proceeds of about $6 billion.
More recently, Polk said he had identified other assets for new disposals worth an additional $4 billion. He did not name them, but some analysts feel that Coleman and other components of the group's outdoor & recreation segment are concerned by the management's accelerated transformation plan. The capricious weather conditions of the last few months likely affected their results, supporting the idea that they should be sold. It's quite possible that Martin Franklin, a co-founder of Jarden, will bid for some of these assets through an investment vehicle, J2 Acquisition, formed together with other former Jarden executives. J2 raised $1.25 billion through a public offering last year to help finance any takeovers.
Analysts disagree over the potential valuation of Newell's outdoor businesses. Figures ranging from $500 million to $1.42 billion have been cited for Coleman, and from $700 million to $900 million for Marmot, for example. In any case, they feel that Newell will strive to obtain multiples for their enterprise value of around 12 times Ebitda, as it did on average for the eight divestitures it made in 2017.
One of the analysts, Wells Fargo, is reportedly assuming valuation ratios of 1.6 times sales and 10.5 times Ebitda for a strong brand like Coleman, quoting Ebitda of $134.9 million on sales of $900 million, which are expected to grow by 2 percent. With the revenues of Newell's fishing business expected to decline by 8 percent from its current annual level of $555 million, Wells Fargo estimates that it could fetch pre-tax proceeds of $624 million, or 9 times Ebitda.
