Newell Co. is paying nearly $6 billion to take control of Rubbermaid Inc., one of North America's top injection molders.
Though Newell has no plans to close any Rubbermaid plants, it cannot predict how the merger will affect employees, a Rubbermaid spokeswoman said.
The two consumer products giants said Oct. 21 they will combine operations by early next year into Newell Rubbermaid Inc., a firm with annual sales of more than $6 billion. It will be the largest durable consumer products maker in the world and the fifth-largest in consumer products overall.
Newell of Freeport, Ill., will pay about $5.8 billion in shares and assume about $500 million in debt for a 60 percent interest in the new firm. That price is a 49 percent premium over Rubbermaid's stock price before the deal was announced.
Once it is complete, Newell will begin its so-called ``Newellization'' process on Rubbermaid operations, the companies said in a joint news release. That strategy is meant to achieve 98 percent on-time performance and a minimum pretax profit margin of 15 percent.
Rubbermaid spokeswoman Lorrie Paul Crum said the companies do not plan to close any plants after the merger. She did not say whether any jobs will be eliminated. In 1997 Rubbermaid employed roughly 12,600 and Newell about 26,400.
The deal is not an acquisition, Crum stressed, because there is no product overlap and old product lines will not be sold off. The companies competed when Newell owned Anchor Hocking Plastics Inc., a storage container molder in St. Paul, Minn. But Newell sold off Anchor Hocking to Home Products International Inc. of Chicago in mid-September.
Rubbermaid and Newell have known each other for a long time and, during the years, officials floated the idea of merging when the time was right, Crum said. Now is a good time because global economic uncertainty threatens consumer purchasing, and already-competitive markets promise to get tougher, she said.
Newell will benefit from Rubbermaid's brand recognition, broader distribution and a bigger presence in Europe, John McDonough, Newell vice chairman and chief executive officer, said in the release.
Rubbermaid Chairman and CEO Wolfgang Schmitt said: ``No one manages the blocking and tackling of consumer products customer service better than Newell. Their disciplines and systems are exactly what [Rubbermaid needs] if we were to optimize the value of our brands and innovations.''
Newell Chairman William Sovey will become chairman of Newell Rubbermaid; McDonough will be vice chairman and CEO; and Schmitt will be vice chairman.
Crum said the merger should help Rubbermaid in its efficiency efforts, already under way. Those restructuring and manufacturing improvements include closing or selling a plant in Oyonnax, France, early next year. Earlier this year it closed operations in Australia, New York and North Carolina. The firm also is investing in new molding machines and robots to cut cycle times and free up production capacity.
Apparently, those streamlining efforts are beginning to pay off. Rubbermaid's sales in the third quarter rose 21 percent to $31.7 million before taxes and a $21.8 million restructuring charge. Sales grew 8 percent to $628.6 million vs. a year ago.
Rubbermaid, a bigger consumer of plastic than Newell, is the third-largest North American injection molder based on resin consumption estimates from Phillip Townsend Associates Inc. of Houston. The firm also is among the top 15 blow molders and is No. 1 in rotational molding, based on Townsend's resin figures.
The firm's Wooster-based Little Tikes Co. unit, which rotomolds toys and playground equipment, contributed $221 million to Rubbermaid's $2.4 billion in corporate sales in 1997. Rubbermaid also sold about $117 million of rubber products last year, according to Rubber & Plastics News, a sister publication to Plastics News.
Newell uses different plastics processes than Rubbermaid, such as extrusion. Its diverse range of businesses include office products — a plastics-intensive business it bought from Rubbermaid last year — home hardware, window blinds, picture frames, home storage products, hair accessories and aluminum and glass cookware. The firm's sales totaled $3.23 billion in 1997.
Crum said Newell Rubbermaid will have a small head office at an undetermined location, and both companies will continue operations at their current headquarters. Rubbermaid's corporate hub is in Wooster, Ohio, where its Home Products and Little Tikes units also are based.
The new company will have stock market capitalization worth $14 billion.