<p>Battery maker Rayovac Corp.'s announcement that it will purchase privately held United Industries Corp., maker of lawn care and pet supply products, was cheered Tuesday by Wall Street as an opportunity by Rayovac to transform itself into a more diversified company.</p><p>The $537 million deal will allow Atlanta-based Rayovac, third behind Duracell and Energizer in the U.S. battery market, to broaden the company's array of household products, which currently includes Remington shaving products, and enable it to get more out of its operational expertise and existing relationships with retailers.</p><p>It also would lessen Rayovac's reliance on battery sales to account for the majority of its revenue, said Peter Barry, an analyst with Bear, Stearns & Co. in New York. Shares of Rayovac soared $4.43, or nearly 15 percent, to $33.99 in afternoon trading Tuesday on the New York Stock Exchange, well above its 52-week high of $31.39 set in mid-December.</p><p>"I think what the market is telling us is if this transaction is finalized, this is in fact a transforming event for Rayovac," Barry said.</p><p>If the deal closes as expected in February, battery-related sales will only account for about 40 percent of Rayovac's overall revenue, compared to 65 percent to 70 percent as a standalone company, Barry said. Also, the combination will benefit Rayovac because United Industries' niche, lawn care products, usually has strong sales during the first six months of the year, while Rayovac's battery sales are usually strong during the second half of the year, Barry said.</p><p>"The combination of United Industries and Rayovac now balances the seasonal characteristics of this company in a decidedly more even fashion," he said.</p><p>Under terms of the deal, Rayovac would issue 13.75 million shares of its common stock and pay $70 million in cash for United Industries shares, which are not publicly traded. At Monday's closing price, the Rayovac shares were worth $406 million, but the value shot up Tuesday after news of the deal.</p><p>As part of the deal, Rayovac would assume about $880 million of United Industries debt and a cash tax benefit of $140 million. United Industries is based in Maryland Heights, Mo., a suburb of St. Louis.</p><p>The two companies would have a combined 9,300 employees and revenue of roughly $2.45 billion, officials said. Asked if there would be job cuts, Nancy O'Donnell, vice president of investor relations, said "down the road, possibly." But, she said, there are no current plans to reduce the overall work force.</p><p>United Industries estimated its annual revenue is about $950 million; it did not say how much it earned in 2004. Rayovac has annual revenue of $1.5 billion; it posted a profit of $55.8 million, or $1.61 a share, for its 2004 fiscal year, O'Donnell said.</p><p>Rayovac's chairman and chief executive, David A. Jones, said the company had been looking at branching out into new industries. "We've actually spent the last few years exploring this category," Jones said in a telephone interview Tuesday morning.</p><p>Rayovac approached United Industries within the last few months, Jones said.</p><p>In a conference call, Jones said the acquisition gives Rayovac a chance to get into three fast-growing industries, especially the pet supply industry.</p><p>Currently, the pet supplies business _ while growing quickly _ is very fragmented, Jones said. Rayovac's acquisition is a step toward consolidating it, Jones said.</p><p>United Industries Chief Executive Bob Caulk said the deal would create a stronger company. His company's products also include Spectracide and Sta-Green lawn products, Hot Shot and Repel insect control products and pet supply products under the Marineland, Perfecto and Eight in One brands.</p><p>___</p><p>Associated Press Writer Bernard McGhee in Atlanta contributed to this report.</p><p>___</p><p>On the Net:</p><p>HASH(0x18351e8)</p>
