Bank Of America Positive On Energizer Holdings Split, Offers 8 Points Of Note
Energizer Holdings (NYSE: ENR) on Friday filed its Form 10 for the spin of its Household Products (New Energizer) from the Personal Care Business.
Olivia Tong of Bank of America on Monday commented that the filing provides the following eight key details on the two businesses.
- The timing of the split is still expected to occur by the end of the third quarter.
- The Personal Care is showing a higher than previously anticipated EBITDA which would have a higher valuation than the Household business once split.
- Gross margins were approximately 300 basis points higher in Personal Care than Household but operating margins were approximately 50 basis points lower in fiscal 2014.
- Advertising and sales promotion is higher for Personal Care than Household while Household products ad spend margin is low but has increased since fiscal 2012.
- Research and development as a ratio of sales has been higher for Personal Care (2.7 percent in fiscal 2014) than Household (1.4 percent).
- Both segments have a roughly 50/50 domestic to international sales mix.
- Pre-tax spin costs are estimated to be $350 million to $425 million, costs to Household are expected to be $170 million to $200 million and $180 million to $225 million for Personal Care.
- The new Energizer (Household) company intends to pay a regular cash dividend while there is no word yet on Personal Care.
Bottom line, Tong believes that while organic sales have been "sluggish" the split of the company into two will likely drive incremental shareholder value.
Shares are Buy rated with a $138 price target.
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