Over the past few months, we've been writing about how the credit crunch has sidelined private equity firms, giving
corporate acquirers an advantage in the competitive M&A market. Well on Monday comes a reminder that lenders can derail strategic deals too -- and not just on the buy side.
Of course, there are some private equity firms involved in this situation as well. Here's the story so far:
Spectrum Brands Inc. announced on Monday that its
$693 million deal to sell its pet supply unit to Salton Inc. had
failed to get approval from its senior lenders. The company had planned to use cash proceeds from the sale to pay down debt. Spectrum didn't offer details, but it seems its lenders aren't convinced that selling the United Pet Group unit is the best strategy or perhaps that Spectrum has secured the most favorable deal terms.
The deal snag comes three days after a BMO Capital Markets analyst questioned the sale, sending Spectrum's stock tumbling to a 52-week low.
According to reports, the analyst noted that Spectrum's other businesses -- lawn and garden products, batteries and personal-care brands -- were "sensitive to volatile commodities." Prospective buyer Salton was to get financing from the private equity firm Harbinger Capital Partners, which owns a 9.8% stake in Spectrum. The buyout shop Thomas H. Lee Partners is also a significant Spectrum stakeholder. It acquired 23% of the company when it sold battery maker Rayovac Corp. to Spectrum for $1.2 billion in 2005.
Spectrum isn't giving up on the sale, saying it still believes it is in the best interest of shareholders. The sale is part of broader restructuring designed to improve the "overall capital structure" of the company, according to chief executive Kent Hussey.
- Suzanne Stevens
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