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Helen of Troy Attracts Suitors Amid Activist Pressure

NEW YORK (The Deal) -- Even though a number of potential suitors would be interested in acquiring Helen of Troy's (HELE) housewares and kitchen appliance brand, Oxo International, the diversified consumer products company is more likely to sell itself as a whole rather than in pieces, according to a source.

"Nine out of 10 buyers want this company for Oxo," said a source familiar with the matter.

The source named Clorox  (CLX) and Kimberly-Clark  (KMB) as being among the consumer products companies that would find the Oxo brand attractive.

"But as for the rest of the company, how many thermometers and fan companies do you need?" the source said, referring to its Braun division, which sells thermometers, and its Honeywell-branded fans, humidifiers and air cleaners. "Maybe that's why a strategic buyer is less likely than a financial buyer."

In fact, Helen of Troy, based in El Paso, Texas, sells a varied portfolio of products even beyond thermometers and fans. It also sells hair dryers, tea kettles and cleaning tools, among other things. Aside from Oxo, some of its better-known brands span three prominent segments - personal care, housewares and home environment - include Honeywell, PUR water filtration, Dr. Scholl's, Brut, Vicks, Revlon and Sure.

One downside of Helen of Troy's history of asset purchases and brand roll-ups is that "it would result in significant tax leakage or significant tax bill should management decide to sell the company in a piecemeal fashion," the source noted.

On Thursday, Helen of Troy shares finished at $59.08. While shares have advanced more than 62% over the past 12 months, the source believes the company can fetch $65 or so per share in a sale, even though there isn't an obvious buyer for the entire enterprise. The source bases that value on the 10 or so times Ebitda that Helen of Troy's consumer products peer, Jarden (JAH), is currently trading for. Given Helen of Troy's approximately 32.06 million outstanding shares, a $65 per share offer would value a transaction at about $2.1 billion - which is nine times the company's projected Ebitda of $233.5 million that's annualized off the $58.4 million it garnered in its most recent quarter.

Meanwhile, the company is facing pressure from activist shareholder Sachem Head Capital Management, which on Tuesday sent a letter to Helen of Troy's board, noting its poor governance, the excessive compensation of the its former CEO, Gerald Rubin, and the cash hoard on its balance sheet.

The New York-based hedge fund, established by William A. Ackman protege Scott Ferguson in July, wants Helen of Troy to consider selling itself.

According to Sachem, which owns a 3.7% stake in the company as of Wedneday, Helen of Troy has already dismissed at least one legitmate offer from a potential strategic buyer that it describes as being a "well-respected company with financial resources and proven acquisition track record."

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