Newell expands its divestiture plan and said it plans to sell Waddington for $2.3 billion(May 4, 2018)

박재훈투영인

created At: 2/27/2025

Sell

This analysis includes a sell recommendation. Please carefully review all mentioned risk before proceeding.

NWL

Newell Brands

102

Fact

Newell Brands will sell its plastics packaging unit (Waddington Group) for $2.3 billion. This is the first major move after activist investors gained board seats. Newell is adding Jostens and Pure Fishing to its divestiture plan. The divestitures are expected to reduce net sales and workforce by over a third. Newell expects to complete all transactions by the end of 2019. Q1 sales fell, but normalized earnings beat estimates.

Opinion

While Newell's stock jumped on the Waddington sale, the expanded divestiture plan introduces both opportunity and risk. The aggressive streamlining signals a major strategic shift under pressure from activist investors. While improved focus may benefit the remaining brands, the significant reduction in sales and workforce creates uncertainty about Newell's future growth. If the divestitures fail to command high multiples or restructuring efforts falter, the initial positive reaction could reverse, negatively impacting the stock.

Core Sell Point

Newell's strategic shift toward aggressive streamlining through significant divestitures presents both opportunities and risks, potentially impacting the stock based on the success of the restructuring and the value realized from the asset sales.

Newell Brands said on Friday it would sell its plastics packaging unit Waddington Group for $2.3 billion, and added more brands to a divestiture plan aimed at streamlining its operations and cutting costs.

The sale of Waddington, which makes disposable cutlery and drinkware, is the first major divestiture after activist investors Starboard Value and Carl Icahn placed their nominees on the company’s board last month.

Newell’s shares were up 6 percent at $28.29 in early trading. The stock took a beating after the company, which sells everything from Sharpie pens to Crock-Pot cookware, first laid out plans in January to explore options for several of its businesses.

As part of its agreement with Icahn, Newell said in March its divestitures would bring in about $10 billion, ratcheting it up from its previous estimate of $6 billion.

Newell said on Friday it would add Jostens and Pure Fishing to the list of brands it plans to sell, with the expanded divestiture plan ultimately reducing its net sales and workforce by more than a third.

The moves come as the company’s retailer customers such as Walmart and Target pare back inventories to cut costs as fewer shoppers visit brick-and-mortar stores.

“All of these assets should command competitive multiples ... the sale of Waddington validates that belief,” Chief Executive Officer Michael Polk said during a conference call.

Newell said its divestiture process was “well underway” and expects to complete all transactions by the end of 2019 and become a company with net sales of about $9.5 billion in 2020.

“Investors never wanted Newell to own Waddington and likely underestimated the multiple a sale could bring,” Renaissance Macro Securities analyst April Scee said.

The company also reported first-quarter sales that fell nearly 8 percent and missed analysts’ estimates, mainly due to divestitures in 2017 and the liquidation of Toys ‘R’ Us.

But normalized earnings of 34 cents per share beat the average estimate of 26 cents, according to Thomson Reuters I/B/E/S.

“With continued organic weakness and conflict with Starboard ongoing, there’s enough noise in the stock ... However, intended divestitures improve focus or help odds of successful restructuring,” Scee said.

The company also reaffirmed 2018 net sales and earnings forecast.

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