Clorox Co. agreed to sell its STP and Armor All auto-care brands to private-equity firm Avista Capital Partners for about $780 million in cash.
The deal for the businesses, which had global sales of about $300 million in the year ended June 30, probably will close by the end of the year, Oakland-based Clorox said Tuesday. Clorox plans to use the proceeds to buy back stock.
Clorox Chief Executive Officer Don Knauss said in May that the bleach maker would explore options for the auto-care brands because the businesses have languished for years and aren't a good match. Earnings lost from the sale of the unit will trim profit by 20 cents to 25 cents a share this year, Clorox said.
"It's a reasonable price," said Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York who has an "underperform" rating on the shares. "It was not a fast- growing business, but they are very good brands with very good margins."
Five-year-old Avista, made up of the former DLJ Merchant Banking Partners, invests primarily in health-care, energy and media companies. Kirkland & Ellis LLP served as Avista's legal adviser.
The sale will be the sixth divestiture for Clorox in the past decade, with the last one completed in 2003, according to data compiled by Bloomberg. Clorox fell 89 cents to $66.72. The shares have gained 9.4 percent this year.
The deal is subject to regulatory and other approvals and is expected to close by the end of the year. It includes two plants, one Painesville, Ohio, with 70 employees, and one Wales, in the U.K., with 24. Overall, about 160 employees are affected by the sale.
Jefferies & Co. analyst Douglas M. Lane said that the brands are profitable and have strong market share. He told clients in a note Monday, when reports of a possible deal surfaced, that the sale makes sense for the company's strategy of focusing on health and wellness and sustainability, all important to shoppers right now.
The company earned $4.24 a share in the year ended June 30. It's spent almost $3.6 billion on share repurchases in the past six years, including a $2.3 billion buyback in 2005, according to Bloomberg data.
The Associated Press contributed to this report.