Spectrum Brands Holdings Inc (SPB)

[Enterprising Investor]

Spectrum Brands gains for second day after court hearing on DOJ deal lawsuit (3/30/23)

By Joshua Fineman, SA News Editor

Spectrum Brands (NYSE:SPB) rose 2.8% after gaining 6.4% on Wednesday after a judge held a hearing in advance of a trial where the Dept. of Justice is suing to block Assa Abloy (OTCPK:ASAZF) from acquiring the door hardware unit for $4.3 billion from Spectrum Brands.

"While we have no legal background, in our view, SPB/ASSA came out of the hearing with the upper hand vs the DOJ, as Judge Reyes pushed back on two key DOJ arguments," Raymond James analyst Olivia Tong, who has a market perform rating on SPB, wrote in a note on Thursday. The trial is set to begin on April 17.

The DOJ sued to block the Swedish company from acquiring the door hardware unit for $4.3 billion from Spectrum Brands (SPB) back in September. Spectrum Brands' shares soared 27% on Dec. 2 after Assa announced an agreement to sell some assets to Fortune Brands Home & Security (FBIN) for $800M to try to remedy the DOJ's concerns.

Raymond James Tong expects Spectrum Brand (SPB) shares to see a "strong" positive reaction if Judge Reyes allows the deal to go through, though the DOJ could choose to appeal, further dealing resolution of the matter at a "volatile" time for the industry due to slowing demand in home-related categories.

The upward move in Spectrum Brands (SPB) shares also comes after the company was initiated with a buy rating and $82 price target at Canaccord on Thursday.

The sale of the door unit is "key to unlocking significant value for shareholders," Canaccord analyst Brian C. McNamara wrote on Thursday.

Canaccord said the sale of the Spectrum Brands' (SPB) door hardware unit is not priced in the stock currently and the company could use after-tax proceeds of ~$3.5 billion to immediately pay off $2.1 billion in debt.

"With a new leverage target of 2.5x, we believe SPB could deploy more than $1.5bn in capital for share repurchases —~60% of its current market cap — if HHI gets the thumbs up by regulators," McNamara wrote.

Spectrum Brands (SPB) was also initiated with a peer perform rating at Wolfe Research on Thursday.

https://seekingalpha.com/news/3952787-spectrum-brands-gains-for-second-day-after-court-hearing-on-doj-deal-lawsuit