Clorox to Move Auto Care Unit - Analyst Blog

Clorox Corporation's (CLX) concerted efforts since May in 2010 to find a buyer for its auto-care unit has finally reached fruition as Avista Capital Partners enters into an agreement to acquire the Global Auto Care business from Clorox for a pay-out of $780 million, subject to regulatory approval and other closing conditions.

The auto unit's distinguished brands, Armor All and STP, are marketed across the U.S., Australia, Canada and Europe. Armor All products, mostly in the form of sprays, gels, liquids and wipes, are exclusively intended to clean, shine, and protect the most interior and exterior automobile surfaces. The STP product includes oil additives, brake fluid and fuel-system cleaners.

Clorox intends to sell off this business unit as it is no longer core to the company's stratagem, in order to focus on key consumer aspects such as health and wellness, and sustainability. The segment contributed $300 million to total revenue in fiscal year June 2010.

The transaction, which is expected to close by the end of the year, will reduce earnings by 20 cents to 25 cents per share this year. However, this dilution will be somewhat countered by the $780 million share repurchase announced by the company, thereby using the cash proceeds from the sale to boost shareholder value. Over the past six years, the company has made share buybacks of approximately $3.6 billion.

The sale of the business unit marks the sixth divestiture made by Clorox over the last decade. The company had last divested its Jonny Cat litter business in 2003.

Clorox is a leading manufacturer and marketer of consumer products and markets namesake bleach and cleaning products in the United States and internationally.

Avista Capital Partners is primarily into investment in energy, health care and media companies. It was a part of the consumer products sector of its parent company, DLJ Merchant Banking Partners, before it was spun out as a standalone entity. The acquisition of Global Auto Care represents an attractive investment opportunity for the company as its brands have worldwide acceptance and strong market share position.
 
CLOROX CO (CLX): Free Stock Analysis Report
 
Zacks Investment Research