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Energizer To Split Batteries From Care Products

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Energizer To Split Batteries From Care Products

Energizer Holdings Inc. (ENR), known for its battery-powered pink bunny and Schick shavers, plans to separate its household-products and personal-care units into two publicly traded companies.

The split will be a tax-free spinoff to shareholders and is expected to be completed in the second half of the 2015 fiscal year, St. Louis-based Energizer said today in a statement. The stock jumped the most in at least 14 years. 

The split is the culmination of three years of measures aimed at improving shareholder value, including cutting expenses and initiating a dividend. In the year through yesterday, the stock had gained just 2.2%, underperforming larger consumer companies like Procter & Gamble Co. and Kimberly-Clark Corp.

“Splitting this company is a good idea from a sum-of-the-parts perspective -- investors would benefit from a split,” Ali Dibadj, a New York-based analyst at Sanford C. Bernstein & Co., said in a phone interview. “Operationally, the companies would probably do better with more focus.”

The shares surged 16% to $113.77 at 9:49 am in New York and earlier reached $115.79 for the biggest intraday gain since March 28, 2000.

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Consumer Spinoffs

The household-products division, which sells batteries and portable lighting products, reported revenue of about $1.9 billion in the twelve month period ended March 31. The personal-care unit, which has brands including Schick razors and Hawaiian Tropic sunscreen, had $2.6 billion in revenue over the same period.

Several notable consumer brands have been separating parts of their businesses into more focused companies. In 2012, Kraft Foods Inc. spun off its North American grocery unit and changed its name to Mondelez International Inc. (MDLZ) to focus on its global snacks business. That same year, Sara Lee Corp. split into Hillshire Brands Co. (HSH) and a European-based coffee and tea company called D.E. Master Blenders 1753.

Revenue at Energizer has declined in each of the last four quarters. The company’s cost cutting in 2012 included plans to close factories in Missouri, Vermont and Malaysia. Energizer is splitting in two as rival Procter & Gamble also looks for ways to streamline operations and trim expenses to boost revenue. PG this month agreed to sell its most of its pet-food operations to Mars Inc.

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Potential Acquisitions

Both of the former Energizer companies could be potential candidates for an acquisition, Dibadj said. The battery unit could be attractive to private equity firms looking to do a leveraged buyout because “it’s not a bad cash business,” he said.

“The personal-care business could be acquired by some of the players who don’t have these categories -- some of the European players or global players in Asia -- whoever’s willing to compete against Procter & Gamble and doesn’t have these categories,” said Dibadj.

Dibadj rates the shares market perform, the equivalent of a hold.

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After Energizer’s separation is completed, current Chief Executive Officer Ward Klein is expected to serve as executive chairman of the personal-care business. David Hatfield, currently president and CEO of Energizer Personal Care, is expected to lead as CEO of that unit. Alan Hoskins will serve as CEO of the household-products division.

Bloomberg

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