Until recently, serial dealmaker Martin Franklin appeared to have something of a special talent when it came to using small takeovers to construct companies seemingly out of thin air.
With a record that included turning a tiny canning company into a leading household goods conglomerate called Jarden, the 51-year-old had no trouble winning support from outspoken investors such as hedge fund manager Bill Ackman, as he sought to take his buy-and-build approach to new sectors of the economy.
But those ventures — Platform Specialty Products, a chemicals company, and Nomad Foods, a frozen-foods group — have struggled in recent months. Some investors say the sheen has come off Mr Franklin, who is the son of Sir Roland Franklin, a favoured lieutenant of the famed British corporate raider James Goldsmith.
After a series of acquisitions backed by debt and the issuance of new shares, the stock prices of Platform and Nomad have fallen more than 40 per cent since September. The declines have coincided with escalating concerns among stock market investors about companies that have taken on heavy piles of debt to make acquisitions.
It is in that context that Mr Franklin agreed to sell Jarden on Monday — the US household goods company he founded — at a 25 per cent premium, to its larger rival, Newell Rubbermaid. The cash-and-stock deal, worth $20.2bn including debt, will create a company that makes everything from Rubbermaid plastic food containers and Sharpie markers to Rawlings baseball mitts and Breville sandwich toasters.
The deal, in which Newell will pay $60 for each Jarden share, will value Mr Franklin’s stake in the company at close to $530m. Mr Franklin owns 7.1m shares in Jarden and he will have another 1.8m shares granted as part of an equity incentive plan that will vest through the transaction.
Aside from cementing his own personal fortune, the takeover will allow Mr Franklin — who is joining the Newell board along with two others — to return his attention to reviving the fortunes of Platform and Nomad.
Mr Franklin said the decision to sell Jarden was unrelated to his other two main ventures. However, the entrepreneur conceded that he would have more time to concentrate on shepherding Nomad and Platform.
“Look, I didn’t sell Jarden to focus on my other companies, I did it because I believed it was in the best interest of the company and its shareholders. It could have gone either way, but at the end Newell acquired Jarden as it has a bigger market capitalisation. It made more sense,” said Mr Franklin. “As a result of this, I will certainly have a little more time to dedicate to my two other businesses, which I intend to keep on growing.”
One person who has worked with Mr Franklin in recent years says: “Martin didn’t anticipate how [Platform and Nomad] were going to trade off but his thesis is still valid. This Jarden-Newell deal signifies he is a shareholder-friendly guy and demonstrates that he is the kind of entrepreneur that is always willing to consider value-creating combinations.”
Still, some investors wonder whether he can succeed with Platform and especially Nomad, which is targeting a sector where profit margins are small and growth prospects are poor.
Most importantly, Mr Franklin will need additional capital to make further deals to expand those companies. “I like to have large investors with deep pockets and long time horizons. If you want to move quickly, you need the security that you can do it,” Mr Franklin told the FT earlier this year.
Mr Franklin will hope Monday’s deal will be a helpful reminder to the market of why they invested with him in the first place.
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