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 Rayovacs 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 Americas largest consumer market. Rayovac replaced Microlites 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 Ningbos 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.