They've Won the Battle, Now comes the War.

Implications: Did Harbinger overpay for Applica?

How will they improve Applica's performance?

Is Salton their next piece of the puzzle?

Analysis:

Having watched the battle between Harbinger and Hamilton Beach since the summer of 2006, I am now more convinced than ever that this deal has some real downside. To be fair, as a former Hamilton Beach executive, I am a bit biased, but this is going to take a lot of hard work to pay off. The incremental $88 million investment will require an enormous effort to show a meaningful return in a market of falling prices and extremely talented competition. A good rule of thumb in this business is probably a long term operating profit target of 10-12%. With that in mind some serious restructuring may be required.

From my perspective, a large amount of damage has been done by the length of time this battle has gone on. Living with an unknown fate day-in and day-out for the rank and file at Applica has taken its toll. Now with a big price tag being paid by Harbinger at the checkout, this team must quickly prove its worth. Sure, there are incremental revenue and working capital opportunities to be exploited, but those take time. That is why folding Applica into Hamilton Beach made so much sense. It is going to take refined sales and marketing strategies to provide required ROI on the Applica investment.

The interesting angle for those of us who follow this industry is determining how Harbinger plans to utilize Applica in a grander scheme. Clearly, it makes more sense to combine Applica with another small appliance player like Salton. Then they could seek to carve out a leading market share position. The problem is, buying Salton, with its current and historical financial picture, makes the turnaround that much harder. There are even rumors that Leon Driemann may be asked to head up a new Salton/Applica combination. Given his up and down history, I can only imagine Jarden and Hamilton Beach smiling.

What ever is going to happen must occur soon as morale slips and large industry events like the International Home and Housewares Show in March showcase new brands, products and positionings. More importantly, key retailers are going to want to feel confident placing trust in Applica to supply products and this could impact key assortment decisions.

Jarden’s success in merging multiple brands and business, within this sector, has shown that with enough time it can be done.The difference was Jarden had stronger teams in place at the starting gate to begin the battle than Harbinger does today.