Spectrum Brands stockholders question valuation, call plan unconfirmable

By Caroline Salls

Pittsburgh, April 16 - Spectrum Brands, Inc.'s official committee of equity security holders said it still believes that the company's final disclosure statement still lacks specific details about how financial adviser Perella Weinberg calculated the estimate of Spectrum's firm value at only $2.3 billion, according to a committee news release.

The disclosure statement was approved Wednesday by the U.S. Bankruptcy Court for the Western District of Texas.

The committee said it will ask the court to deny confirmation of the proposed plan of reorganization or call for changes that would provide adequate compensation for existing shareholders by allowing them to maintain an ongoing equity participation.

While Perella Weinberg revised their estimate of firm value $100 million higher than their previous estimate in the initial version of the disclosure statement, the committee said it still finds this revised valuation to be inexplicably low, at only 6.9 times the $332 million in EBITDA projected for 2010, with a resulting equity value of only $610 million.

According to the release, all that is required for existing shareholders' equity to be in the money is an enterprise value of more than $2.562 billion, or 7.7x EBITDA, and a resulting equity value of more than $872 million, "hardly difficult multiples to imagine given most comparable companies trade at higher multiples on both measures today."

The committee said it plans to present evidence at the plan confirmation hearing that the plan is unconfirmable because it proposes to give noteholders new notes and new common stock with a value greater than the amount of their claims, which is unfair to existing shareholders.

As previously reported, existing shareholders are not scheduled to receive any distribution under Spectrum's plan.

In addition, the committee said the plan's lack of fairness is highlighted by the fact that members of the company's board of directors and management, who currently hold only 3% of Spectrum's stock, could be awarded up to 10% of the reorganization company's stock under a proposed equity incentive plan.

The committee said this stock award "seems like a perverse reward for their decision to put the company through this highly questionable Chapter 11 filing and to support a reorganization plan which seeks to wipe out existing shareholders."

Despite its concerns, the committee said it was pleased that the approved disclosure statement incorporated most of the additional language proposed by the committee.

Spectrum Brands is an Atlanta-based consumer products company and supplier of batteries, lawn and garden products, pet supplies, shaving and grooming products, household insect control products, personal care products and portable lighting.

The company filed for bankruptcy on Feb. 3. Its Chapter 11 case number is 09-50455.

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