Church & Dwight Co., Inc. (CHD - Free Report) inked a deal with Ideavillage Products Corporation to purchase renowned hair removal brands — FLAWLESS and FINISHING TOUCH. The move is likely to boost the company’s portfolio and provide greater growth opportunities. Let’s take a closer look.
Terms of the Deal
The announced deal is valued at nearly $900 million. This includes cash payment of $475 million as well as an earn-out cash payment — up to no more than $425 million — on the basis of a 12-month net sales target till latest Dec 31, 2021. The buyout is likely to close in the second quarter of 2019 and will be financed through debt. In the short run, Church & Dwight does not expect any material synergies from the acquisition of the brands.
The deal is not likely to have any net impact on Church & Dwight’s bottom line in 2019, which is expected to grow in the range of 7-9%.
FLAWLESS: A Worthwhile Inclusion
With consumers becoming increasingly conscious regarding beauty and wellness, Church & Dwight’s strategy to expand offerings in personal care is appropriate. Notably, FLAWLESS and FINISHING TOUCH are among the leading brands in hair removal. They are marketed in the United States and in more than 30 nations globally. Markedly, as on Dec 31, 2018, net sales for these brands amounted to $180 million with an EBITDA margin of almost 30%.
These banners will become a part of the Church & Dwight’s power brands portfolio. These will also be a significant inclusion to the company’s specialty haircare category, which comprises popular brands like BATISTE dry shampoo and VIVISCAL hair thinning supplements. Apart from boosting margins and strengthening portfolio, the acquired brands are likely to provide substantial logistics as well as manufacturing leverages.
Efforts to Boost Portfolio Strength Bode Well
Notably, Church & Dwight is undertaking prudent acquisitions to boost portfolio. Some of the noteworthy buyouts of the company include Waterpik, Agro BioSciences, ANUSOL and RECTINOL among others. Additionally, Church & Dwight focuses on product innovations. For 2019, the company has announced several launches under the household and personal care categories. Further, the company’s stout consumer international business is consistently contributing to organic sales growth. Markedly, a strong brand position is a key catalyst in expanding the company’s business overseas.
Such upsides are helping this renowned personal care products company to expand market share across key regions and boost revenues. Also, these factors are bolstering investors’ confidence in this Zacks Rank #3 (Hold) stock. Notably, shares of the company have gained 9.7% in the past month compared with the industry's rise of 5.6%.
Moreover, we expect the company’s strategic endeavors to offset the adverse impacts from rising input costs. Further, we expect that the latest inclusion of FLAWLESS and FINISHING TOUCH brands will be accretive toward boosting performance in the long run.
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