Edgar Filing: JACUZZI BRANDS INC

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(Rule 14A-101)

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

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o	Definitive Proxy Statement

x	Definitive Additional Materials

o	Soliciting Material Under Rule 14a-12

JACUZZI BRANDS, INC.

(Name of Registrant as Specified in its Charter)

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Jacuzzi Brands, Inc.

Cash Acquisition By

Apollo Management, L.P.

January 10, 2007

Forward Looking Language /
Where to Find Additional Information

These materials contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Jacuzzi Brand's current expectations with respect to future market conditions, future operating results and other plans. Words such as “expects,” “intends,” “anticipates,” “plans,” “projects,” “probably,” “believes,” “estimates,” “may,” “will,” “should,” “shall,” and similar expressions typically identify such forward-looking statements. Even though Jacuzzi Brands believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. In particular, various economic and competitive factors, including those outside our control, such as interest rates, foreign currency exchange rates, inflation rates, instability in domestic and foreign financial markets, acts of war, terrorist acts, outbreaks of new diseases, consumer spending patterns, energy costs and availability, freight costs, availability of consumer and commercial credit, adverse weather, levels of residential and commercial construction, changes in raw material and component costs, and the credit worthiness of our customers, insurers, and investees, and other factors contained in Jacuzzi Brand's filings with the SEC could cause our actual results to differ materially from those expressed in these materials.

In connection with the proposed merger, Jacuzzi Brands filed a proxy statement with the Securities and Exchange Commission on January 5, 2007. JACUZZI BRANDS URGES INVESTORS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The proxy statement and other relevant documents may be obtained free of charge at the SEC's website, www.sec.gov, or from Jacuzzi Brands by directing such request to Jacuzzi Brands, Attention: Diana Burton, Vice President - Investor Relations, Phillips Point - West Tower, 777 South Flagler Drive, Suite 1100, West Palm Beach, FL 33401. Telephone: (561) 514-3850.

Jacuzzi Brands Overview:

Exclusive Focus on Bath and Plumbing

	FY 2006 total sales of $1.2 billion

	Bath

	–	FY2006 Sales: $766.6 million (64% of total sales)
	–	Global leader in whirlpool baths and spas
	–	Need for continued operating improvement
	–	Consumer and residential focus
	–	International market 47% of sales
	–	UK Bath business requires extensive restructuring

	Plumbing

	–	FY2006 Sales: $435.8 million (36% of total sales)
	–	Engineered water solutions with leading market positions
Specification drainage Backflow preventers & valves Plumbing systems & commercial faucets PEX piping & radiant heating
	–	Historical operating margin of approximately 20%
	–	Commercial and institutional focus
	–	North American market 98% of sales

	Alex Marini, long-term head of Plumbing, promoted to CEO on August 31, 2006

Compelling Transaction (1 of 2)

	Affiliates of Apollo Management L.P. to acquire 100% of the outstanding common stock of Jacuzzi Brands for $12.50 per share in cash
	–	Total transaction value of approximately $1.25 billion
	–	Implied FY2006 EBITDA multiple of 9.6x
	–	Implied FY2006 P/E multiple of 22.3x

	Premium to Jacuzzi Brands’ pre-deal stock price and historical trading prices:
	–	46.4% premium to pre-proposal price of $8.54 on August 4
	–	28.5% premium to the closing price 30 days prior to October 11
	–	20.8% premium to October 10 pre-announcement closing price of $10.35

	Immediate and certain cash value for Jacuzzi Brands stockholders

	Committed financing through combination of equity contributed by Apollo and debt financing

Compelling Transaction (2 of 2)

Below market break-up fee (2% of transaction value) provides low financial hurdle to any interested potential acquirer
Fairness opinion from Lazard
Approved by Jacuzzi Brands’ Board of Directors
Customary closing conditions, including approval by Jacuzzi Brands’ stockholders
Expected to be completed by early to mid-February 2007

Apollo’s Offer Of $12.50 Per Share In Cash Is Compelling and Represents Fair Value For Jacuzzi Brands Stockholders

Increasing Longer Term Hurdles (1 of 3)

Challenging operating environment for Bath and Plumbing
–	Continuing weakness and negative impact of residential housing market downturn
		Declining housing starts
		Start / completion gap at near historic levels
		Existing home prices under pressure and remodeling market has yet to rebound
–	Significantly declining domestic spa market
		Industry volumes in 2006 are reported to be lower by 30-40% compared to 2005 and trend is continuing
–	Consolidating customer base
		Increasing retail pressure in U.S. and UK
		Wholesale market consolidation
–	Slowing growth in domestic commercial and institutional construction activity
–	Volatile commodity costs
–	Stagnant economies in most significant European markets

Increasing Longer Term Hurdles (2 of 3)

Competition is becoming more aggressive
–	Increased foreign competition
		Bathroom suites
		Kitchen sinks
		Commercial brass
		PEX
		Drains
–	Kohler Tier One Program
–	Roca aggressively attacking European markets
–	Existing customers establishing private-label brands through foreign sourcing

Increasing Longer Term Hurdles (3 of 3)

Continuing investments required to improve performance
–	Manufacturing to foreign sourcing
–	Legacies and corporate SG&A
–	UK operations challenging
		Two-year trend of increasing losses, although improving
		Significantly underfunded UK pension in a more stringent UK regulatory environment limits alternatives

World-famous brand but unfavorable industry characteristics

Jacuzzi Brands Faces Significant Operational and
Financial Challenges As A Stand-Alone Company

Fiscal 2007 Forecast

In December 2006, management revised projected EPS from continuing operations to $0.75 per share (excluding merger costs)
–	Aggressive fiscal 2007 earnings target includes estimated $0.04 per share of non-operational items including:
		Sale of surplus properties
		Increased non-cash pension income
		Favorable currency exchange
		Lower tax rates
–	Major assumptions include:
		Successful execution of business strategies to outperform the residential housing market, which the Company expects to decline but moderate while the renovation market improves
		Continued growth in domestic commercial and institutional construction activity
		Successful new product introductions driving sales and profit margins for the Bath segment, which has experienced increasingly difficult trading conditions
		Successful marketing initiatives and dealer enhancements to increase spa market share, in a significantly declining domestic market, together with increased penetration of European markets
		Continued conversion of copper plumbing to PEX, consistent with recent industry trends, sufficient to overcome both increased competition and a declining residential construction market
		Return to profitability of the U.K. operations following a 2-year trend of increasing losses
		Product price increases to offset continued overall inflationary cost pressures on commodities including energy
		Continued reductions of corporate overhead costs
		Increased non-cash pension income, primarily due to a higher discount rate

To Successfully Navigate These Challenges,
Jacuzzi Brands Must Operate On All Cylinders
To Achieve Its Stated Earnings Objectives For Fiscal 2007

Extensive, Thorough Board Process (1 of 2)

	Board of Directors commenced a strategic review of the Company’s business and operations (October 2004)
	–	As part of this process Lazard was asked to prepare a review of Jacuzzi Brands’ business plan, acquisition strategies and strategic alternatives (December 2004)

	Board authorized Lazard, with oversight by the Finance Committee, consisting solely of independent directors, to gauge potential interest (February 2005)
	–	As a result 9 potential buyers (including Apollo) executed confidentiality agreements and received non-public information

	In May 2005, the Company publicly announced the Board’s intention to review strategic alternatives with the assistance of Lazard
	–	Following this public announcement an additional 4 parties executed confidentiality agreements and received non public information

	Interested parties declined to bid a premium for the Company following a downward trend in the financial performance of the Bath business (August 2005)
	–	No attractive offers made for either the whole Company or its businesses
	–	Board decided to focus on stabilizing downward trend; terminated COO (who had been designated as the CEO successor); and deemphasized sale process
	–	Company’s various legacy liabilities, including asbestos, product liabilities, underfunded UK pension plan and environmental, turned out to be difficult gating issues for strategic buyers

Extensive, Thorough Board Process (2 of 2)

	Summary preliminary indications of interest from Spring 2005 to Spring 2006
	– No attractive offers received

CA’s Sent	Type	Offers Received

13	7 Strategic	2 “at market” offers for the Company
	6 Financial	4 offers for Bath
		7 declined to make an offer

	Apollo’s investment in Rexnord, which closed in July 2006, turned Apollo into a strategic buyer

	Apollo reiterated its interest in the Company after teaming up with George Sherman, former CEO of Danaher Corp. and current non-executive Chairman of Rexnord (July 2006)
	– Made firm offer to acquire the Company (August 2006)
	Company Board engaged in extensive negotiations over price and terms of Apollo proposal

	Jacuzzi Brands’ Board of Directors approved the Company’s merger agreement and merger with Apollo and determined that the merger was in the best interests of the Company’s stockholders (October 2006)

	As of the date of this presentation, no third party has contacted Jacuzzi Brands to request confidential information or to make a superior proposal since announcement of Apollo transaction

	All other offers were preliminary and no party in original process provided a definitive, firm transaction at the valuation originally indicated

The Apollo Transaction Is The Only Premium Offer
Received By Jacuzzi Brands

Strategic Considerations

	Board of Directors proactively reviewed a full range of alternatives to maximize stockholder value
	–	Remain independent and operate the business
	–	Sell Jacuzzi Bath and repurchase shares
	–	Re-leveraging of balance sheet and/or return of capital to stockholders through repurchasing shares

	Alternatives considered showed projected returns less than the proposed Apollo transaction

Sale of Jacuzzi Brands To Apollo Is The Most
Compelling Value Maximizing Alternative For Stockholders

The Apollo Transaction Remains Superior
To All Other Alternatives

Valuation Analysis

	(a)	EPS capitalized at 15-17x and discounted at 12% cost of equity.
	(b)	Based on 2007E EBITDA.
	(c)	Based on 2006 EBITDA.

Roadmap to Completion

	Record date for stockholder vote		December 11, 2006

	Distribution of proxy materials		January 5, 2007

	Annual Meeting of Stockholders		January 25, 2007

	Anticipated closing of transaction		Early to Mid-February 2007

Conclusion

	The Apollo-Jacuzzi Brands transaction was the result of an extensive and thorough exploration of strategic alternatives

	Apollo’s offer of $12.50 per share in cash represents fair value for Jacuzzi Brands stockholders

	Apollo’s all-cash premium offer is and remains the only offer received by Jacuzzi Brands

	Jacuzzi Brands’ Board of Directors recommends that all stockholders vote FOR the Apollo transaction

Appendix: EBITDA

	($ in millions)
		FY2006

	Operating Income	$ 103.6

	Depreciation and Amortization	24.4

	EBITDA Before Restructuring and Other Charges	$ 128.0

(1)	Includes restructuring and other charges of $7.2 nillion ($1.2 nillion of which is accelerated depreciation), $2.6 nillion of cost associated with the previous CEO’s retirerrent and $2.9 nillhn of SEWcosts related to previous years.

Jacuzzi Brands, Inc.

Cash Acquisition By

Apollo Management, L.P.

Important Information for Investors and Stockholders

In connection with the proposed merger, the Company filed a proxy statement with the Securities and Exchange Commission on January 5, 2007. THE COMPANY URGES INVESTORS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The proxy statement and other relevant documents may be obtained free of charge at the SEC’s website, www.sec.gov, or from the Company by directing such request to Jacuzzi Brands, Inc., Attention: Diana Burton, Vice President - Investor Relations, Phillips Point - West Tower, 777 South Flagler Drive, Suite 1100, West Palm Beach, FL 33401. Telephone: (561) 514-3850.

The Company and its directors, executive officers and other members of management and its employees may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with the merger. Information about the Company’s directors and executive officers is set forth in the Company’s proxy statements and annual reports on Form 10-K, previously filed with the SEC, and the proxy statement relating to the proposed merger.