Spectrum Brands Raises $200 Million in Note Offering

Spectrum Brands Inc., parent of United Pet Group, and parent Spectrum Brands Holdings Inc. of Madison, Wis., in November agreed to sell $200 million of senior secured notes. Spectrum originally planned to sell $150 million of notes but “upsized the deal” due to “strong demand in the marketplace,” said Dave Prichard, Spectrum’s vice president of investor relations and corporate communications.

Proceeds from the offering would be used for general corporate purposes, including working capital, refinancing existing debt, expansion and possible future acquisitions.

“The primary impetus is for more tuck-in or bolt-on acquisitions, especially for our pet supplies business,” Prichard said, adding that Spectrum wanted capital on hand as it was in active talks on multiple acquisition opportunities.

The focus of future deals likely would be cat and dog with likely categories including dog and cat treats, healthcare, nutrition, pet training and containment, and possibly in the reptile category, Prichard said.

Spectrum also is looking to grow its home and garden business through acquisitions, Prichard said.

Earlier in November Spectrum reported it acquired the Black Flag and TAT insecticide brands from Bellingham, Wash.-based The Homax Group Inc., a portfolio company of Olympus Partners of Stamford, Conn. Homax focuses primarily on home improvement products for consumers and contractors.

“The Black Flag and TAT brands immediately will strengthen our United Industries’ home and garden product portfolio and its share of the $2.5 billion U.S. consumer pest-control market,” said Dave Lumley, CEO of Spectrum Brands Holdings and president of its home and garden division. “The Black Flag and TAT products will give us even stronger capabilities to serve the consumer marketplace while expanding our household insecticide presence in several less developed retail channels.”

The products include flea foggers and sprays and mosquito sprays, traps and repellents.

Lumley said the deal would create operational synergies, notably “additional aerosol and liquid production utilization for our home and garden division’s St. Louis manufacturing facility.”

Terms of the all-cash transaction were not disclosed.

The new 9.5 percent Senior Secured Notes due 2018 would be in addition to $750 million worth of existing notes, Spectrum reported.

As of Sept. 30, Spectrum had $142 million of cash and cash equivalents and total debt of $1.59 billion, according to preliminary and unaudited financial data, the company reported to the Securities and Exchange Commission.

For its fourth quarter ended Sept. 30, Spectrum’s global pet supplies business, which includes United Pet Group and TetraPond, reported net income of $6.3 million on sales of $153.8 million, compared with net income of $15.7 million on sales of $145.1 million in the year-ago period. Spectrum attributed the 6 percent increase in revenue largely to increased sales of aquatic products in North America (due to promotional activities with key retailers) and Europe (favorable foreign exchange).

Spectrum's home and garden business posted net income of $12.9 million on sales of $80.6 million for the fourth quarter, compared with net income of $9 million on revenues of $76.3 million in the year-ago period.

For the year, Spectrum's global pet business generated segment profit of $75.6 million on sales of $578.9 million, compared with profit of $57.7 million on sales of $566.3 million in the previous year. For the year, its home and garden business generated segment profit of $65.2 million on sales of $353.9 million, compared with profit of $51.2 million on sales of $342.6 million in the previous year.

Overall, Spectrum posted a net loss of $33.8 million on sales of $827.3 million for its fourth quarter, compared with a net loss of $24.3 million on sales of $789.0 million in the year-ago period.

For its fiscal 2011, Spectrum reported a net loss of $75.2 million on sales of $3.2 billion, compared with a net loss of $190.1 million on sales of $2.6 billion in the previous year.

Also, Spectrum approved a one-year, $30 million common stock repurchase program in October.

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Spectrum Brands Raises $200 Million in Note Offering

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