Jacuzzi Brands Inc., parent company of Sundance Spas Inc./Jacuzzi Spas Intl., has signed an agreement to sell to a private equity firm for $1.25 billion.
The acquisition by New York-based Apollo Management, LP, will include the assumption of $257 million of outstanding debt. Jacuzzi shareholders will receive $12.50 per share, a 21 percent premium over the stock’s closing price of $10.35 on Oct. 10. After the sale was announced on Oct. 11, Jacuzzi’s stock soon hit a high of $12.76.
The transaction would make West Palm Beach, Fla.-based Jacuzzi Brands, which went public in May 2005, a privately owned company. “I like the idea of a privately held company because I think there can be a greater efficiency in terms of how fast you can react to capital needs,” said Jonathan Clark, president/CEO of Sundance Spas Inc./Jacuzzi Spas Intl.
The sale is expected to close in the first quarter of 2007. It is contingent upon shareholder approval, regulatory approval and receipt of equity and debt financing.
Clark does not expect the sale to affect the spa manufacturer’s day-to-day operations. He believes this purchase is the next step in the company’s evolution since Jacuzzi Inc. purchased Sundance Spas in 1998.
“We went from a small, entrepreneurial firm to a larger firm that could supply us some of our capital needs for expansion,” Clark said. “There’s a pending offer [by Apollo] to buy us out … and I know that the moves I make in the future are going to require capital. [For instance], I’m continuing to move forward on a plant in Eastern Europe, and the expansions of our product line and dealer base.”
In a press release, Apollo said that upon completion of the sale, Jacuzzi Bath, including the portable spa business, will become a separate company. Apollo also plans to sell Zurn, Jacuzzi’s plumbing division, to Rexnord Corp., a manufacturer of power transmission, aerospace and other motion technology products. Rexnord is a company in Apollo’s existing portfolio.
Al Marini, Jacuzzi Brands president/CEO, will continue to lead Zurn and Jacuzzi Bath. George M. Sherman, Rexnord’s non-executive chairman, will have the same title with Jacuzzi Bath.
“With the resources of Apollo and the experience brought by George Sherman, we will be well-positioned to develop and implement cutting-edge strategies to build upon our already strong leadership positions,” Marini said in a press release.
Besides Marini, “certain members of Jacuzzi Brands’ management … are expected to remain with the business after closing,” Jacuzzi Brands stated in a press release.
Apollo and Jacuzzi Brands declined to provide additional comments.
The pending sale has met a bump in the road. Shortly after it was announced, Jacuzzi Brands’ largest shareholder, Southeastern Asset Management Inc., voiced opposition to the deal. The firm called the per-share buyout price “insufficient.”
In addition, two shareholder class-action suits were filed against Jacuzzi Brands and its board, stating that the defendants breached their fiduciary duties by signing the agreement with Apollo.
“The company has reviewed the allegations … and believes that the lawsuits are without merit,” Jacuzzi Brands stated in a press release. “The company intends to vigorously defend itself against the claims.”