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 Rayovac and Varta Combine to Form Consumer Battery Business
By Shirley Georgi

The all-cash transaction is expected to close in the Fall of 2002 and is valued at 262 million Euros (US $262 million).Adobe Photoshop Image Rayovac will become one of the largest consumer battery companies in the world by combining the their battery business with Varta; in fiscal 2001 the two entities generated $1 billion in sales in over 100 countries. (Currently, Rayovac has sales in 60 countries.) In the deal, Rayovac will acquire all of the Varta consumer subsidiaries located outside of Germany and will become the majority owner of a new joint venture entity that will conduct all consumer battery operations within Germany. “The German joint venture will be run as KGaA in order to smoothly coordinate the segregation of the consumer battery business from the micro battery business as well as to ensure continuity in the management of the consumer battery business and its relations with customers and suppliers,” explained Walther Wever, CFO of Varta.
To complete the transaction, Rayovac is obtaining necessary financing from Bank of America and Citigroup. The borrowed money will be used to not only fund the transaction but also to retire existing debt and fund the capital needs of the larger company.
 Varta sells another battery business -
this time to Johnson Controls
On August 6th, Varta and Johnson Controls (JCI) announced that an agreement had been reached whereby JCI would acquire Varta’s Automotive Battery Division for 312.5 million Euros (US$308 million.)
The transaction is targeted to close near the end of the calendar year.
Varta’s auto batteries business, comprising Varta Automotive GmbH and its 80 percent in VB Autobatterie GmbH, supplies all European automakers; in 2001 sales were 590 million Euros. It has operated six battery assembly plants in Europe located in Austria, the Czech Republic, France, Germany and Spain.
When the acquisition is complete, JCI expects to have annualized battery sales of approximately US$1.8 billion with market leadership in Europe as well as the Americas.
The European business will be combined with Rayovac’s existing European operations and led by Remy Burel, Chairman of Varta’s consumer battery business. As part of the agreement, Consumer Batteries will continue to be the distributor of micro batteries produced by VARTA Microbatterie GmbH in the traditional retail channel.
Dave Jones, Rayovac chairman and CEO said, “Upon closing this deal, Rayovac will be one of the largest battery companies in the world with the No. 1 market position in Germany (the largest European battery market), the No. 2 overall market position in Europe, a stronger #1 position in Latin America, (excluding Brazil) as well as the leading value brand in North America.
Dr. Georg Prilhofer, chairman of Varta AG, stated, “With Rayovac’s strong track record of innovation and marketing skills, we believe the Varta consumer battery business will be aligned with a company that can maximize its full potential. This deal will also allow Varta AG to concentrate our efforts on our other businesses.” Other businesses include Varta Microbatterie, which produces batteries used in electronic equipment such as mobile and cordless phones. The Company will be focusing its energies on serving it global base of OEM (Original Equipment Manufacturers) and specialty customers.
Gains for Rayovac

Technology - Varta has been a leader in creating batteries for high-drain devices. They have expertise in photo and rechargeable batteries. Varta’s high-speed manufacturing process and equipment design have high quality standards.
Markets - In Europe, Varta’s consumer battery products are sold in more than 200,000 retail locations and in seven of the top ten global retailers. In Germany, Varta holds 40 percent of the consumer battery market and is the top selling brand in Austria, Finland, Croatia and Slovenia. Varta’s consumer battery products are sold in 100 countries world wide.
Revenues -Varta’s consumer battery business had sales of 398 Euros (US $398 million) in fiscal year 2001. Operating results before interest, taxes, depreciation and amortization were 38 million Euros (US $38 million).
Global presence - Consumer products analyst at Bank of America Securities, William Steele, probably summed up the impact when he said, “There’s one primary motivator and that’s when you are dealing with global retailers like Wal-Mart, Royal Ahold and Carrefour, you’d better be a global vendor.” The deal with give Rayovac the top position in Germany’s market and the second position (the number 1 position currently held by Duracell) in Europe.
In an interview with Reuters, Dave Jones said, “It was the most meaningful thing we could do to globalize our business. This was the big kahuna!”1
Reference:
“Varta sells appliance battery ops to Rayovac ”by Gill Griffith-Jones and Brad Dorfman, Reuters (Frankfurt/Chicago), 07/31/02
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