- THE MAGAZINE
"As we announced earlier, this acquisition is a perfect fit for our platform and we are excited with the growth opportunities of this brand in the U.S. and internationally," said Garry O. Ridge, president and CEO of WD-40 Co.
The purchase price of $47 million was funded through a combination of cash, stock and debt. The debt is comprised of a $20 million three-year term loan at a fixed interest rate of 6.29% from Prudential Capital Group, an institutional investment division of Prudential Financial. Another portion of the proceeds was provided by working capital and funds from a revolving credit facility with Union Bank of California. The stock portion was valued at $12 million.
As previously announced, the company expects the acquisition to be accretive by one or two cents in fiscal 2002 and between 15 and 20 cents in fiscal 2003.
"We expect the major elements of the acquisition to be fully integrated by July 1, 2002," Ridge said. " Both companies have similar outsourced manufacturing and multi-trade channel distribution models and these synergies will help us achieve full integration by the end of fiscal 2002."
Sales of the Heartland brands in the past twelve months were about $34 million with a gross margin slightly higher than the current WD-40 Company overall gross margin. Revenues are generated primarily by the Spot Shot brand and a smaller percentage of sales are generated by several general cleaning, carpet and upholstery brands. "Although the majority of the sales are within the U.S., the Spot Shot brand has good distribution in Canada," said Ridge. The company plans to divest Heartland's small cleaning & upholstery brand portfolio.
The company plans to close the Heartland operations near Kansas City by the end of fiscal year 2002. Manufacturing of the Spot Shot brand will continue through its current outsourced manufacturing facility in St. Louis. "WD-40 company continues to have an excellent track record using an outsourcing-manufacturing model," said Ridge, "and we plan to continue using that model as we merge the Spot Shot brand into its supply chain."
In the first full year, total SG&A expenses are expected to increase about $4.5 million mainly due to the added costs of product distribution and the addition of 9 new positions in San Diego. These positions are in sales and marketing, information technology, customer service, finance and administration.