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Manufacturing WD-40’s stock dips following its acquisition of a household cleaner manufacturer

News from WD-40 Co., including that of a major acquisition, sent the company’s stock down roughly 9 percent near the end of March and kept it at that level in the week that followed.

The stock was trading near a 52-week high in late March when the San Diego-based company announced it would acquire a New Jersey maker of household cleaners for an undisclosed price.

The company, HPD Holdings Corp. of Edison, N.J., does business as Global Household Brands and distributes products such as X-14 mildew remover, 2000 Flushes and Carpet Fresh.

WD-40 released terms of the deal after the market closed March 28. The San Diego company’s stock, which closed that day at $22.39, closed the following day at $20.38. It closed on either side of the $20 mark in the week that followed.

The company traded in the $18 to $23 range the previous year and hit $23 during the day March 23.

WD-40 agreed to acquire HPD Holdings for roughly its annual sales of $69 million, according to Garry O. Ridge, WD-40’s president and CEO.

The sellers will receive cash and $5 million in stock. Cash will come from a portion of WD-40’s new, $85 million senior secured credit facility, led by Union Bank of California.

The deal should close by the end of this month.

Global Household Brands’ gross margin is about 55 percent, roughly the same as the combination of WD-40’s current products, Ridge said in a prepared statement.

In addition to the lubricant that bears its name, WD-40 makes 3-In-One Oil as well as the Lava and Solvol brands of heavy-duty hand cleaners.

Ridge said the acquisition “marks an important milestone in creating a new business model” and diversifies the company’s products. He added WD-40 will be able to build current brands and launch new products in its new distribution channels.

The company also reported March 28 it will pay a quarterly dividend of 27 cents per share , less than the 32 cents per share it paid in previous quarters.

“The new dividend rate allows us to get a more favorable credit facility for financing our upcoming acquisition,” said Ridge in a prepared statement, adding the dividend cut was “the best long-term move for us.”

The company reported net sales of $41.3 million in its second quarter, ended Feb. 28, compared with $42.6 million in the year-ago period.

WD-40 trades on the Nasdaq under the symbol WDFC.


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