Church & Dwight Co., Inc., based in Ewing, has signed a definitive agreement to acquire Water Pik, Inc. (“Waterpik”), the market leader in water-jet technology in both oral water flossers and replacement showerheads, for approximately $1 billion in cash. The transaction, which is subject to regulatory approval and other customary conditions, is expected to close in the third quarter.
Waterpik’s net sales for the trailing twelve months through June 30, 2017 were approximately $265 million. Waterpik is the #1 water flosser brand and the #1 replacement showerhead brand in the U.S. Approximately 70% of net sales are in the water flosser segment with the remainder in showerheads. The international business represents approximately 20% of sales. The products are marketed in the U.S. and Canada and exported to over 80 countries.
“Oral care is important to us strategically,” said Matthew T. Farrell, Church & Dwight Chief Executive Officer. “Waterpik represents a powerful addition to our existing oral care portfolio which includes ARM & HAMMER toothpaste, SPINBRUSH battery-operated toothbrushes and ORAJEL oral analgesics. The flosser products business is a fast-growing platform and capitalizes on the trends of increased gum disease, oral care awareness across all demographics and expansion of the middle-class in emerging markets. The Waterpik brand has a strong reputation among dental care professionals. Our oral care portfolio gives Church & Dwight a leading position in a growing category with tailwinds as the population ages and consumer interest in oral health continues to expand.”
“We are excited to enter the replacement showerhead business. Water conservation is a growing trend. Waterpik’s showerhead technology contributes to efforts globally to conserve water while providing consumers a refreshing shower.”
Waterpik’s trailing twelve months EBITDA was approximately $80 million, a 30% EBITDA margin. Once the business is fully integrated, Church & Dwight expects to leverage its distribution network and operating discipline to achieve an estimated $10 million in operating synergies by 2019.
“Waterpik will be our 11th power brand. The acquisition is consistent with our strategy of acquiring #1 or #2 brands in areas with growth potential,” Mr. Farrell said. “It is a strong, growing business with an established history of innovation. The science behind water flossing and water conservation is strong and Waterpik has an expertise in water jet technology.”
“The Waterpik business is located in Fort Collins, Colorado. The Company intends to maintain the Fort Collins facility. Mr. Farrell said, “This business has a highly capable management team, and we are pleased to welcome them to the Church & Dwight family. Waterpik is nimble and asset light and should be an excellent fit.”
The acquisition is structured as a stock purchase that the Company expects to finance with debt. The acquisition is expected to be neutral to 2017 EPS, inclusive of transition costs, acquisition-related expenses, interest expense and intangible amortization expense.
Mr. Farrell said, “We continue to expect 2017 reported earnings per share (EPS) to be $1.75 to $1.77 and adjusted EPS to be $1.92, consistent with our previous outlook, inclusive of the neutral EPS effect of the acquisition.”
“In 2018, we expect to deliver approximately 18% reported EPS growth as 2017 reported EPS includes previously disclosed charges related to the Brazil Specialty Products business and the settlement charges related to our U.K. pension.
We expect to deliver 9% adjusted EPS growth ($2.09) driven by 7% EPS growth of our existing business, plus 3% accretion from the Waterpik acquisition inclusive of interest and intangible amortization expenses. In addition, one-time transition costs will negatively impact EPS by 1%.”
Waterpik was acquired from MidOcean Partners. BofA Merrill Lynch acted as financial advisor to Church & Dwight and Proskauer Rose LLP acted as legal advisor. Harris Williams and Wells Fargo acted as financial advisors, and Kirkland & Ellis LLP acted as legal advisor to MidOcean Partners.