Fortune Brands Home & Security FBHS has entered into a definitive agreement to acquire the Emtek and Schaub premium door and cabinet hardware business and the Yale and August smart residential business in the United States and Canada from Assa Abloy, Inc.

The transaction is valued at $800 million in cash or approximately $700 million net of tax benefits on a cash-free, debt-free basis, subject to customary adjustments.

The acquisition will help Fortune Brands strengthen its position in the residential security market. Upon completion of the transaction, FBHS, presently carrying a Zacks Rank #4 (Sell), expects to receive tax benefits over a 15-year period with a net present value of approximately $100 million.

Fortune Brands Home & Security, Inc. Price

Fortune Brands Home & Security, Inc. price | Fortune Brands Home & Security, Inc. Quote

The acquisition is, however, contingent upon the closing of the divestiture of Spectrum Brands’ SPB Hardware and Home Improvement (“HHI”) segment to Assa Abloy.

In September 2021, Spectrum Brands, carrying a Zacks Rank #3 (Hold), announced an agreement to sell its HHI unit to Assa Abloy for $4.3 billion in cash. This September, the United States Department of Justice (“DOJ”) sued to block the deal on concerns that the merger could give Assa Abloy a monopoly in the mechanical door lock market and raise prices.

Assa Abloy’s deal with Fortune Brands to sell its Emtek and smart residential business in the United States and Canada is aimed at addressing DOJ’s concerns over the reduced competition as a result of a potential merger between Spectrum Brands’ HHI unit and Assa Abloy. SPB is confident of winning DOJ’s approval on its divestiture of HHI to Assa Abloy.

Fortune Brands’ acquisition deal as well as Spectrum Brands sale of HHI, are expected to be completed in the second quarter of 2023, contingent upon DOJ’s clearance.

Key Picks

Some better-ranked stocks within the broader Retail-Wholesale sector are as follows:

Ethan Allen Interiors ETD sports a Zacks Rank #1 (Strong Buy), at present. ETD pulled off a trailing four-quarter earnings surprise of 36%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ethan Allen Interiors’ fiscal 2023 earnings has been revised 20% upward in the past 60 days. Shares of ETD have rallied 21.5% in the past six months.

Walmart WMT currently carries a Zacks Rank #2 (Buy). WMT delivered a trailing four-quarter earnings surprise of 3.8%, on average.

The Zacks Consensus Estimate for Walmart’s fiscal 2023 earnings has moved 3.8% north in the past 60 days. Shares of WMT have gained 22.4% in the past six months.

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Walmart Inc. (WMT) : Free Stock Analysis Report

Fortune Brands Home & Security, Inc. (FBHS) : Free Stock Analysis Report

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