Fortune Brands announced today it will spin off its home and security division--a group that includes Moen faucets, MasterBrand Cabinets, Therma-Tru doors, Simonton windows, and Master Lock--into an independent, publicly traded company with annual sales topping $3 billion.
The tax-free spinoff of Fortune Brands Home & Security LLC to existing shareholders is part of a larger strategy in which Fortune will also sell or spin off its golf business, leaving Fortune Brands to focus on its distilled spirits business, Deerfield, Ill.-based Fortune said in a news release. Details on when and how the spinoff will take place are now under development and will be revealed within the next several months, the company said.
"We are taking the next logical step in the evolution of Fortune Brands, which we believe will maximize long-term value for our shareholders and create exciting opportunities within our businesses," Bruce Carbonari, chairman and chief executive officer, said in the news release. "Today's announcement is the result of an ongoing strategic review process conducted by the board and management over the past four years that included regular evaluation of separating the businesses at the right time to serve the best interests of our shareholders.
" While the breadth and balance of our portfolio have served shareholders very well, we see the potential for even greater value by separating our businesses into focused companies at a time when they have emerged from the economic downturn in such strong positions," Carbonari continued. "We believe now is the right time to move ahead with this tax-efficient approach, and we're confident the course we've outlined today generates greater potential long-term value than all other alternatives."
The home and security groups has annual sales topping $3 billion. In the company's most recent financial report, issued Oct. 28, Fortune Brands announced that the operating income in the third quarter for its home and security division rose 4% above the year-earlier level to reach $73.6 million on a 1.4% rise in sales to $813.7 million. Company-wide, net income fell 17.3% to $102.6 million, primarily because of an 18.8% operating profit decline in its spirits division. Net sales company-wide inched up 0.2% rise to $1.72 billion.
"Home & Security has enhanced its position by playing offense during the downturn and front end of the recovery," Fortune Brands said in its news release. "The company has created lean and flexible supply chains by both reducing costs and accelerating productivity initiatives. Significant new business wins, excellent customer service and successful new-product innovations have contributed to meaningful market share gains. With this momentum, combined with the company's supply-chain flexibility and efficient cost structures, Home & Security will have substantial leverage and upside growth and returns potential as the U.S. housing market recovers."
Simonton Windows president Mark Savan predicted the transition--which he called an "exciting development"--will occur within six to nine months. "During and after the transition we expect no changes in our operations," he said. "The premier brands in the current Fortune Brands Home & Security group will serve as the cornerstones of an exceptional new company."