In what could be the beginning of a comprehensive corporate restructuring, consumer products maker Newell Brands (NWL) has decided to divest Waddington Group, the disposable cups and cutlery business it acquired two years ago. The news brought some cheer to the investors who were not happy about Newell having Waddington in its fold, and the stock gained about 4% in today’s morning session.
When Newell first revealed plans to downsize its mammoth empire in mid-January, to focus more on the consumer products segment, it lost significant market value in a massive stock selloff. The sale of Waddington to Novolex Holdings for $2.3 billion is part of transformation program that is expected to create a total of around $10 billion in proceeds. The transaction, which is expected to close within two months, will generate after-tax proceeds of $2.2 billion.
If the maker of Sharpie pens goes ahead with the divestiture program it charted out last year, the size of its portfolio would shrink by nearly 50% and net sales would reduce by around 30%. The company’s goal is to streamline operations by the end of next year, when the program is expected to complete, and focus on its seven core businesses.
The transaction, to be closed within two months, is expected to generate after-tax proceeds of $2.2 billion
Newell has added Jostens and Pure Fishing to the divestiture list, further expanding the purview of the restructuring, as the company continues to pursue the ‘accelerated transformation plan’, which aims at simplifying its corporate structure and reducing cost.
The Hoboken, New Jersey-based Newell has been witnessing a downturn ever since it acquired rival Jarden for $13 billion in April 2016. Earlier this year, Newell had entered into an agreement with activist investor Carl Icahn to ramp up liquidity by divesting low-performing business divisions.
“We’re pleased with today’s announced sale of The Waddington Group to Novolex. This mutually beneficial deal allows the Waddington team to unlock its full potential under a new owner who is committed to the packaging category, and provides Newell Brands the opportunity to take an important first step forward in our Accelerated Transformation Plan,” said Newell CEO Michael Polk.
Earlier today, Newell reported better than expected earnings for the first quarter, while revenues declined from last year and missed estimates, hurt mainly by the impact of recent liquidation of Babies ‘R’ Us.