Rawlings Sporting Goods, the official ball manufacturer of Major League Baseball, is going to be sold for a 4th time since 2002; this time by Newell Brands (NWL). Newell is “exploring strategic options” for several subsidiaries that don’t align with their renewed focus on household products (9 core consumer divisions). The company, which has doubled in size since its 2016 acquisition of Jarden Corp., announced it will also look to cut its factory and warehouse footprint in half as part of the reorganization.
Howie Long-Short: Deutsch Bank (DB) analysts aren’t high on Rawlings’ business, considered the least valuable the 8 brands NWL wants to sell; worth an estimated $360 million (8x EBITDA, lowest multiple among the 8 brands). While NWL is going to end up selling some of the brands it bought from Jarden at multiples lower than they acquired them for, a company spokesperson was quick to note the company will remain far bigger than it was prior to the acquisition ($11 billion in revenue over 1st 9 mo. of ’17 vs. $6 billion prior). NWL shares are down 16% ($26.12 at Monday’s close) since news of the restructuring and 41% over the last 12 months.
Fan Marino: Rawlings, which also produces basketballs and footballs, has a well established reputation (121 years) and “good market share”; but, operates in a category (sporting goods) that simply isn’t growing. According to the National Retail Foundation, it was the only sector that failed to grow YOY (-.5%) during the holiday season. That likely limits potential buyers to companies that already operate within the space.
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