merger & acquisition

Church & Dwight to Acquire FLAWLESS Brand

Ewing-based Church & Dwight Co., Inc. has signed a definitive agreement with Ideavillage Products Corporation to acquire the FLAWLESS™ and FINISHING TOUCH™ brands of hair removal products, the market leader in women’s electric hair removal products, for approximately $475 million in cash plus an additional earn-out payment of up to a maximum of $425 million, in cash, based on a twelve-month net sales target ending no later than Dec. 31, 2021. The transaction, which is subject to regulatory approval and other customary conditions, is expected to close in the second quarter of 2019.

FLAWLESS’ net sales for the trailing twelve months ended Dec. 31, 2018 were approximately $180 million with EBITDA approximating $55 million (approximately 30% EBITDA margin) over the same period. FLAWLESS is the #1 women’s electric hair removal brand in the U.S. focusing on brows and face while the women’s hair removal category has historically been focused on legs with manual razors and blade products. The products are marketed in the U.S. and over 30 countries. Approximately 10% of net sales come from international markets.

“Women today are more focused on hair removal from their bodies. FLAWLESS provides simple, fast, dermatologist-approved solutions for face, brows and legs. FLAWLESS is a beloved brand by look-conscious consumers who want to be “selfie-ready” at any moment,” said Matthew T. Farrell, Church & Dwight chief executive officer. “FLAWLESS represents a powerful addition to our specialty haircare portfolio which includes BATISTE dry shampoo, VIVISCAL hair thinning supplements, and TOPPIK hair fibers.”

Ideavillage is located in Wayne and will support the FLAWLESS business through a separate long-term services agreement with Church & Dwight. Farrell said, “Ideavillage is led by its founder and CEO, Andy Khubani, who has a passion for innovation and bringing new products to market. Having 20-years of demonstrated success in the development of multiple brands, his success with FLAWLESS stems specifically from years of work in women’s hair removal. Ideavillage is recognized for its highly skilled management team with fast decision making, rapid new product development and speed to market. We are excited to work with Andy and his team on this brand. We expect our global footprint and sales expertise to drive significant sales growth via new distribution and further expansion into international markets.”

Regarding the relationship with Church & Dwight, Khubani said, “We have found the perfect partner for our FLAWLESS brand, and for accomplishing our vision of expanding into new categories and markets. Our cultures complement one another beautifully and I’m very excited and confident in the future.”

FLAWLESS will be the company’s 12th power brand. This acquisition meets the company’s acquisition criteria: (1) primarily #1 or #2 brands, (2) asset-light, (3) high growth and high gross margin, (4) opportunity to leverage manufacturing, logistics and purchasing, and (5) sustainable competitive advantage. The acquisition will be financed at closing with debt and is expected to be neutral to 2019 reported earnings per share, net of transition costs. During the short-term, the company does not expect material synergies as a multi-year service agreement is in place. The company will purchase the inventory following a transition period which is expected to be completed by end of 2019.

Farrell said, “In 2019, we continue to expect approximately 7-9 percent adjusted EPS growth driven by approximately 7-9% EPS growth of our existing business, plus 1 percent accretion from the FLAWLESS acquisition inclusive of interest expense and intangible amortization, less 1% one-time transition costs. The earn-out liability is required to be adjusted quarterly during the earn-out period. This non-cash quarterly adjustment will be included in the company’s reported results, but is excluded from the company’s EPS outlook. The acquisition is expected to increase 2019 cash earnings by 4 percent.”

BofA Merrill Lynch is acting as exclusive financial advisor to Church & Dwight in this transaction.

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