Newell Company: The Rubbermaid Opportunity
In October 1998, Newell Company was considering a merger with Rubbermaid Incorporated to form a new company, Newell Rubbermaid Incorporated. The agreement would be through a tax-free exchange of shares valued at $5.8 billion. Newell had revenues of $3.7 billion in 1998 across three major product groupings: Hardware and Home Furnishings, Office Products, and Housewares. Rubbermaid is a renowned manufacturer of a wide range of plastic products ranging from children's toys through housewares.
Once the transaction is completed, Newell will begin he process of assimilating Rubbermaid's operations through a process called "Newellization." The companies expect that the merger will create synergy through the leveraging of Newell Rubbermaid brands. By 2000, these efforts are expected to produce increases over anticipated 1998 results of $300 to $350 million in operating income for the combined company.
Reading the case analysis, there are many issues that I feel are concerning this merger and I feel that Newell should not process with this merger.
First of all, this is a tough and alarming challenge to Newell's capacity to integrate and strengthen acquisitions. How would Newell bring Rubbermaid into the newellization process since they have completely different products? Another question that comes to mind is how does Newell coordinate all its divisions and what changes will it have to make to create synergy with Rubbermaid? Does the newellization process fit for Rubbermaid? Lastly, are the risks acceptable for Newell to merge with Rubbermaid? Newell needs a very well thought out business plan and has to answer these questions before they proceed.
There are advantages and disadvantages in this merger. I will start with the advantages. If this merger goes through, it will be a quantum step in Newell's growth. The merger will be uniting two companies that are leaders in...