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Prestige Brands Holdings, Inc.’s (PBH - Snapshot Report) shares gained 5.94% immediately after the company announced that it has signed a purchase agreement with Australia-based The Hydration Pharmaceuticals Trust of Victoria to acquire their over-the-counter (OTC) oral rehydration brand, Hydralyte. The acquisition is slated to close by Jun 2014. Financial details were not provided.

With the acquisition of Hydralyte, Prestige Brands expects annual revenues of its Australian subsidiary, Care Pharmaceuticals, to double to nearly $50 million (AUD) in fiscal 2015.

Our Take

This deal marks Prestige Brands’ efforts towards strengthening its OTC portfolio. We note that prior to the Hydralyte deal, Prestige Brands had made four other similar acquisitions in the last five years. Last year, the company acquired Care Pharmaceuticals to boost its OTC healthcare segment.

We remind investors that fiscal 2014 is a transition year for Prestige Brands and that the company intends to focus on the growth of its core OTC segment.  

The upcoming acquisition of Hydralyte will help Prestige Brands expand its business in the Austral-Asia region. With Hydralyte’s leading-OTC-brand status in the market for oral rehydration following diarrhea, vomiting, fever, heat and other ailments in Australia and New Zealand, the addition of Hydralyte to Prestige Brands’ portfolio will be immediately accretive to its fiscal 2015 earnings.

Some approved oral rehydration therapies include Sanofi’s (SNY - Analyst Report) Dioralyte and Abbott Laboratories’ (ABT - Analyst Report) Pedialyte.

Prestige Brands carries a Zacks Rank #4 (Sell). A better-ranked stock in the health care sector is Central Garden & Pet Company (CENT - Analyst Report) carrying a Zacks Rank #2 (Buy).

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Read the Full Research Report on ABT
Read the Full Research Report on PBH

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