O.C.’s Armor All Agrees to Purchase by Clorox Co.
Armor All Products Corp. said Tuesday that it has agreed to be acquired by Clorox Co. in a $408-million marriage of the nation’s top makers of car care and home cleaning products.
The deal, expected to close by the end of the year, will give Oakland-based Clorox shelf space in the lucrative auto care products market for the first time.
Clorox, a $2.2-billion maker of household cleaners and other consumer products, is acquiring a company that leads its markets but also has had to battle highly publicized claims of product defects over the years--most notably that its Armor All Protectant can damage vinyl dashboards and car tops that receive heavy exposure to sunlight.
But although Armor All has paid a $60,000 fine in a product mislabeling case and taken $9 million in charges for recalling products in faulty aerosol cans, the defective-product claims have never been validated.
Clorox is offering $19.09 a share for Armor All, a 17.5% premium over the stock’s three-month trading average of $16.25 a share.
McKesson Corp., the San Francisco health-care services company that owns 55% of Armor All stock, has agreed to sell its shares, and directors of Aliso Viejo-based Armor All favor the offer. Most of Armor All’s shares are held by a few large institutional investors.
The company’s stock was trading unchanged at $17.50 a share on the Nasdaq market Tuesday when trading was halted in conjunction with the announcement. Clorox said it expected to launch its tender offer Dec. 2.
The deal was put into motion several weeks ago but is the culmination of a two-year effort by McKesson to shed its majority ownership of 24-year-old Armor All. McKesson said it will record a $100-million gain from the sale.
McKesson stock dropped 37.5 cents a share Tuesday to close at $56.375, while Clorox shares rose 25 cents to close at $105.50. Both stocks trade on the New York Stock Exchange.
Although Clorox is enthusiastic about acquiring the Armor All product line and retail distribution channels, company officials aren’t saying yet what they plan to do with Armor All’s headquarters in Aliso Viejo or with its 150 employees.
“All that will be worked out in the next few weeks,” said Michael McCafferty, Armor All’s executive vice president and chief financial officer.
He said he expects that some of Armor All’s top managers, however, will leave the company after the acquisition.
McKesson, which acquired Armor All from company founder Alan Rypinski in 1979 for $49 million, began shedding stock in 1986 with an initial public offering of Armor All shares that cut its stake in the company 83%. Since then, McKesson has reduced its stake to 55% by gradually selling shares on the open market. McKesson decided that it wanted to develop its health-care businesses and shed others, like Armor All, that didn’t mesh with that core mission.
At the same time, Clorox--located just across the bay from McKesson--began an aggressive expansion program, acquiring popular cleaning and consumer product brands such as the SOS product line from Miles Inc., the Pine Sol cleaner and Combat insecticide lines from American Cyanamid Inc., and the Lestoil heavy-duty cleaner product line from Procter & Gamble Co.
Armor All “moves us into a major new category,” said Clorox spokesman Fred Reicker. “It’s a market that offers us opportunities to introduce new [automotive] products” from other Clorox brands, he said.
“This fits with Clorox’s goal of 12% annual growth,” said industry analyst Tony Vento of the Edward D. Jones brokerage in St. Louis. “It takes acquisitions like this to meet an aggressive goal like that. They’ve done many in the past, and while Armor All is a little different because of its largely automotive product line, this still fits because it makes cleaning products.”
Armor All reported fiscal 1996 revenue of $186 million, with 73% of its sales in automotive cleaners in the U.S. The company also has a recently launched line of home care products. Armor All leads the $710-million domestic automotive cleaning products market with a 30% share.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Armor Acquired
Aliso Viejo-based Armor All Products Corp. will be sold to Clorox Co. Details of the sale:
ARMOR ALL PRODUCTS CORP.
* Headquarters: Aliso Viejo
* Founded: 1972 by Alan Rypinski; sold to McKesson Corp. for $49 million in 1979
* Went public: 1986 with an offer of 17% of total stock; McKesson kept 83% and since then has reduced holdings to 55%
* Chairman: David McDowell
* CEO/President: Kenneth M. Evans
* Products: Automobile cleaners and protectants including Armor All and Rain Dance car products; wood deck and home exterior cleaners; aluminum products
* Exchange: Nasdaq
* Employees: 149
* Sale price: Stock purchase of $19.09 per share, roughly $408 million, including shares owned by McKesson Corp.
* Fiscal 1996 sales: $186.3 million
* Fiscal 1996 net income: $7.2 million
CLOROX CO.
* Headquarters: Oakland
* Chairman/President/CEO: G. Craig Sullivan
* Business: Bleach, soap and other cleaning preparations, including Clorox Bleach, Pine-Sol and Formula 409; other products include cat litter, charcoal grill products, insecticides, salad dressings and sauces
* Exchange: NYSE
* Employees: 5,300
* Fiscal 1996 sales: $2.2 billion
* Fiscal 1996 net income: $222.1 million
Source: Bloomberg Business News, Armor All Products Corp.; Researched by JANICE L. JONES / Los Angeles Times
