Question

ACQUISITION PROGRAM

Acquisition of Varta AG (Germany)
In 2002, Rayovac acquired the consumer battery business of Varta AG of Germany. Varta was the leading European-based manufacturer of general batteries and 86% of its revenues were generated in Europe. Some overlap in Latin America permitted combined operations which solidified Rayovac’s market lead outside of Brazil. Too, the complementary geographic distribution of the firms’ production facilities and distribution channels was expected to yield greater access to global sourcing and generate cost savings of $30-40 million per year.

Acquisition of Microlite (Latin America)
In 2004 Rayovac acquired Microlite SA, the largest producer of consumer batteries in Brazil and owner of the Rayovac brand name in Brazil. It immediately realized a 50% market share in Latin America’s largest consumer market. Rayovac replaced Microlite’s management team with Rayovac veterans who reduced costs, increased efficiency, improved product packaging, and raised prices 16%. The Microlite business was also undercapitalized and losing money. It was considered by lenders to be a high risk and, consequently, paid very high interest rates. Rayovac immediately recapitalized the business, replacing high interest-rate loans with lower interest rate Rayovac-backed debentures. As a result of the acquisition, Rayovac expected to increase total Latin America revenues by approximately 50% in 2005.

Acquisition of 85% of Ningbo Baowang (China)

Located inNinghai, China, Ningbo Baowang was a major exporter of private label branded batteries. The company also sold its Baowang brand throughout China. Rayovac acquired the Chinese firm in 2004, hoping both to increase its presence in the rapidly growing Asian market and to add a low cost manufacturing subsidiary from which it could export Rayovac and Varta brand batteries to global markets. Rayovac replaced Ningbo’s management with its own to implement Rayovac process controls and management policies more efficiently. It also installed new manufacturing equipment that would allow it to produce over one billion Rayovac branded batteries a year beginning in 2005.  

Explain how this acquisition program helps Rayovac to capitalize upon its strengths and opportunities and neutralize its weaknesses and threats.

Answer 1

Aquiring consumer battery business of Varta AG of Germany--Varta's consumer battery brands are highly regarded in Europe and Latin America. Their battery technology and manufacturing/distribution infrastructure are state-of-the-art. Combining Varta's consumer battery business with Rayovac's existing businesses will create a much stronger global competitor, selling in more than 100 countries worldwide. The combination of these businesses provides a strong platform for market growth, improved customer service and technology advancements for consumers. Rayovac will be one of the largest consumer battery companies in the world with the #1 market position in Germany, the largest European battery market, #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.Rayovac will realize significant benefits in the future as the Rayovac and Varta businesses are combined to strengthen our battery portfolio in important global markets

Acquisition of Microlite SA-The Microlite acquisition included the rights to the Rayovac name in Brazil, giving the company worldwide rights to the Rayovac name.With this acquisition, Rayovac consolidated its presence in the majority of countries in Latin America. Rayovac is a well recognized brand in this region.

Acquisition of 85% of Ningbo Baowang (China)-With the alkaline battery market in China experiencing rapid growth and our global customers expanding throughout Asia, it was imperative that they increase theirmanufacturing capacity in that part of the world.Ningbo producesd alkaline and heavy duty batteries for retail, OEM and private label customers. Organizations incorporated into the M&A procedure and 2002 obtaining of European-centred battery producer VARTA's purchaser battery business, Microlite South America; Brazilian battery manufacturer to develop its operations in South America, the 2004 procurement of 85% partake within Ningbo Baowang,as well as Chinese battery production office to lower the cost of production