Armor All Obtains Competing Line of Car Products : Irvine-Based Company Makes $26-Million Deal with Borden
Irvine-based Armor All Products said Monday that it has acquired the automotive-care products line of its major competitor, Borden Inc., in a $26-million deal that will make Armor All the nation’s leading manufacturer of car-appearance products.
The company, which manufactures the Armor All line of car protection, wash and wax products, said the acquisition will be financed through cash reserves and short-term borrowings, but it would not specify how much it is borrowing.
Borden’s car-care division markets car-wax products under the Rain Dance and Rally brand names, and a line of engine additives under the No. 7 label.
According to A.C. Nielsen Co., Armor All already is the leading manufacturer of auto vinyl and rubber preservatives. Armor All Protectant, for which the firm is probably best known, is used on everything from women’s handbags to vinyl auto tops and upholstery and commands 90% of the market. In December, the company also launched what has become a successful line of car wash and wax products with a $5-million media blitz.
Armor All will control the largest segment of the wash-and-wax market once the Borden deal is completed. According to the most recent Nielsen data, Borden has 18.4% of that market and Armor All has 19.7%. The acquisition will give Armor All 38.1% of the market.
Turtle Wax has been the industry leader but has suffered from Armor All’s charge into the car wash-and-wax field. Turtle Wax has seen its share of the market, which had been 43%, shrink to 31% since December, according to Nielsen.
Borden Car Care had sales of about $15 million in the first six months of the year. McKesson Corp., which owns 83% of Armor All, said that the new Armor All wash and wax products alone accounted for close to $12 million in revenue in the final quarter of the company’s 1988 fiscal year, ended March 31. For the first quarter of its current fiscal year, Armor All posted earnings of $6.4 million and sales of $34.4 million.
According to industry analysts and executives at Armor All and McKesson, the Borden division was ripe for the picking.
Borden has “been fumbling with their car-care products for several years now,” said Sally Schaadt, senior analyst at Fourteen Research in New York. “Rain Dance and other brands that they manufacture are great lines--solid performance, high name recognition--but have suffered because of inattention.”
Analysts have said that sales of Borden’s car-care products have hit a plateau because division management was not experienced in the field. “Borden decided that they shouldn’t devote more time and resources to a division that they were not able to motivate,” said Mary Harden, a securities analyst with Duff & Phelps in Chicago. “Their primary product lines are food and home improvement items.”
Harden said the car-care division’s $15 million revenue was a mere “drop in the bucket” compared to Borden’s total revenue of $6.5 billion and profit of $247 million last year.
One Armor All executive who asked not to be identified said that Borden’s car-products line was never stiff competition. “Sure, the (Borden) products have been sold for 14 years, but Borden’s never been quite sure how to handle them,” he said.
The official said Borden committed a variety of mistakes, including spending too little on advertising. “Borden’s strategy was primarily short-term marketing gimmicks, like coupons,” he said. “However, when there’s heated competition right behind you, you’ve got to do a lot more than that. . . . I wouldn’t be surprised if Borden bought that brand with the intention of selling it.”
Borden said the decision to sell was simply one of expediency. “We decided to concentrate our energies on those areas where we were performing best,” said Nicholas Iammartino, director of financial communications. He said that Borden’s food division and non-food consumer products division are growing rapidly, and require additional resources.
