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issue: July 2006 APPLIANCE Magazine

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Stirring Things Up: Hamilton Beach Talks with APPLIANCE


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by Jill Russell, Senior Associate Editor

Just two days after the announcement of Hamilton Beach/Proctor-Silex's planned merger with Applica, APPLIANCE magazine spoke to Michael Morecroft, the man slated to lead the new company.

Dr. Michael J. Morecroft will be the president and CEO of the new Hamilton Beach, Inc.

Hamilton Beach/Proctor-Silex will spin off from parent company NACCO Industries, Inc. and merge with Applica Incorporated to create the new company, Hamilton Beach, Inc., to be headquartered in Richmond, Virginia, U.S. Dr. Michael J. Morecroft, current Hamilton Beach/Proctor-Silex president and CEO, will be president and CEO of the new company.

Mega Merger

According to Nacco, the proposed transaction will create the largest U.S. public company focused on small electric household appliances. Annual sales are estimated at approximately U.S. $1.1 billion and a the brand portfolio includes Black & Decker(R), Hamilton Beach(R), Proctor Silex(R), Windmere(R), TrueAir(R), Hamilton Beach(R) Commercial and Belson(R).

"It is a compelling strategy to bring together all these very well recognized brands and I think it gives us a lot of focus on being strong enough and sleek enough to give our customers better service," Morecroft tells APPLIANCE.

The new Hamilton Beach will design, market and distribute the same wide range of products its brands are known for, including coffee makers, irons, blenders, toaster ovens, indoor grills, food processors, air purifiers, and personal care appliances. As reported by APPLIANCE in its Portrait of the U.S. Appliance Industry Report, the combined company will hold a 42.2-percent market share of the electric housewares market—which includes blenders, can openers, coffee makers, food processors, irons, and toasters—based on 2004 data.

Too Early to Tell

Morecroft says the merger is set to be complete by the end of the third quarter and is subject to approval by Applica board members and the Securities and Exchange Commission.

Morecroft couldn't say what the future held for product innovation plans, manufacturing facilities or employment, but says the merger will benefit both companies. "When you look at the two companies, what this brings to us is that they have strengths where we don't have strengths and vice versa," he tells APPLIANCE.

Morecroft also believes the merger will reinforce a global position within the housewares industry. "They are very strong in Latin America; they have a strong brand presence in China. We have a strong enduring presence in the U.S. That is going to be the hand-in-the-glove-fit. It is one of those 50-50 things. Put together, I think we'll be very powerful," he tells APPLIANCE.

What we do know is that Alfred M. Rankin, Jr., chairman, president and CEO of NACCO, will become the non-executive chairman of Hamilton Beach, Inc.'s board of directors. Morecroft will lead the company with Hamilton Beach/Proctor-Silex's management, which will be supported by Applica's team.

Morecroft expects the new company to achieve pre-tax annual run-rate cost synergies of approximately $40 million to $50 million, as well as improved working capital efficiency of up to $40 million, by the end of 2008.

For Hamilton Beach/Proctor-Silex, which reported a $20.3 million net income with revenues of $527.7 million and had 1,110 employees in 2005, one hopes Hamilton Beach/Proctor-Silex is making a successful strategic move by merging with Applica.

Half the size of Hamilton Beach/Proctor-Silex with 540 employees, Applica was in the red in 2005 and reported a loss of $49.3 million with revenues of $556.1 million.

When asked about the future strategy for the mega company, Morecroft couldn't give specifics but was quite optimistic the move would be a success. "It's day one, we're just holding hands, we're not even at the alter yet in this marriage," Morecroft tells APPLIANCE. "But, I think it is great for both companies and great for our customers."

 

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