Shares of Fortune Brands
Here's how the deal will work from Fortune's perspective: ACCO will pay Fortune $625 million in the form of a cash dividend as part of its spinoff, and then it will merge with General Binding to create a new company called Acco Brands. Fortune shareholders will not only maintain their ownership in Fortune but also get one share of the new company for every 4.6 Fortune shares they own when the deal closes. (That's expected to happen this summer.) That'll leave them with about 66% ownership of the new firm.
Fortune management is estimating the total value of the deal to its shareholders at $1.1 billion. Divided among the number of shares the company had outstanding at the end of last year, that suggests a value per share of roughly $7.50. But the company's stock picked up just $2.50 yesterday, and that's an indication that investors are willing to look this deal over carefully -- not to mention wait for it to actually happen -- before buying the big shots' version of things.
The long-term picture is open to some interpretation. In terms of revenue, ACCO fits in reasonably well among Fortune's three "smaller" divisions along with booze and golf. (Home and hardware is the big one.) And its growth has been slower than that of the others in recent years.
But ACCO has lately seen strong growth in its operating income despite currently carrying more employees (and their related costs) than the golf or tipple sectors do. By merging with General Binding, a somewhat smaller company that moved into the black in 2004, Acco Brands stands to deliver scale and the opportunity for cost savings while it gets out of a business with little consumer appeal.
Strategically, this looks like a move well worth making.
Fool contributor Dave Marino-Nachison doesn't own shares of any company mentioned.