Newell Rubbermaid To Buy Jarden In Cash-And-Stock Deal Worth $15.4 Billion — Trying To One-Up Walmart?

Newell Rubbermaid is buying Jarden Corp. in a cash-and-stock deal. The deal, estimated to be worth more than $15 billion, will allow Newell Rubbermaid to fend off demands made by one of its biggest buyers — Walmart.

Newell Rubbermaid Inc., the company known for making versatile food containers, has agreed to buy Jarden Corp, whose product lineup includes Sunbeam and Coleman products, for a deal estimated to be worth more than $15 billion. The deal is expected to accord Newell Rubbermaid a lot of leverage with mega-retailers like Walmart. Wal-Mart Inc. has been demanding significant reduction in prices from companies like Newell Rubbermaid, putting the latter in a very tight spot, but acquisition of Jaden Corp. should allow the company to confidently respond to Walmart.

Wal-Mart Inc. is one of the biggest customers for Newell Rubbermaid. The retail chain ensures nearly 13 percent of the latter’s revenue. However, a company that forms such a significant chunk of revenue routinely forces the company to take decisions that aren’t always conducive to the business. Walmart has been asking a lot of its suppliers, including Newell Rubbermaid, to cut prices, reported Reuters.

Newell Rubbermaid To Buy Jarden In Cash-And-Stock Deal Worth $15.4 Billion [Photo by Peter Macdiarmid/Getty Images]The retail chain, too, is forced to make the demands as it is steadily losing business to online retail giants like Amazon. A huge centralized storage and distribution center, combined with low overheads and fast delivery, has allowed e-retailers like Amazon to grab sales from physical retailers like Walmart. This has compelled the latter to keep prices attractively low to ensure customers still buy from physical stores. In order to do so, it needs retailers to cut their prices and margins. Needless to add, Walmart’s decision hasn’t been welcomed by its suppliers.

The deal will allow Newell Rubbermaid it to own a whole bouquet of prized brands, including Paper Mate, Sharpie, Elmer’s, Rubbermaid, Lenox, Yankee Candle, and Graco. Collectively, these brands can help Newell Rubbermaid generate revenue in excess of $16 billion per year. Jarden co-founder and executive chairman Martin E. Franklin had an interesting comment on the acquisition of his company, reported the Street.

“Let’s be absolutely clear, we were not for sale and we didn’t solicit offers from anybody — we entered into conversations by way of an introductory meeting that was made by a banker at Centerview, and Michael (Newell Rubbermaid CEO Michael Polk) and me met for the first time at the Barclay’s back to school conference in September.”

Polk will lead the new company, christened Newell Brands. The transaction will bring a lot of big consumer brands under one roof. Consumer products names which have become household names that will now be under one umbrella brand include Newell Rubbermaid’s Sharpie magic markers and its eponymous rubber food storage containers, and Jarden’s Coleman outdoor equipment and Yankee Candle lines. Incidentally, Jarden had recently acquired two large brands — class ringmaker Jostens ($1.5 billion) and disposable dinnerware maker Waddington Group ($1.35 billion) — which will now be under Newell Brands.

Newell Rubbermaid To Buy Jarden In Cash-And-Stock Deal Worth $15.4 Billion [Photo by Darrell Ingham/Getty Images]Explaining why the acquisition is important for Newell Rubbermaid to face Walmart, Polk added the following.

“Scale does matter. It means we become a lot more important — that means we get the opportunity to have more long-term conversations about the categories with retailers, and it means we have the opportunity to talk to them how to build category with shoppers.”

Despite the leverage, Walmart has always been each company’s largest single customer, and hence, it will be interesting to see how Newell Rubbermaid negotiates to safeguard its interests.

As part of the acquisition, Jarden shareholders will receive $21 in cash and 0.862 shares of Newell Rubbermaid stock for each share they own, reported Townhall Finance. This pegs the value of Jarden Corp. at $13.2 billion. However, as the company has confirmed that that holders of convertible bonds also qualify for the deal, the transaction’s value jumps to $15.4 billion.

[Photo by Ty Wright/Bloomberg/Getty Images]