Benzinga | Nov 29, 2021 06:34AM EST

Church And Dwight Acquires TheraBreath Brand For $580M In Cash

Church & Dwight Co., Inc. (NYSE:CHD) has signed a definitive agreement to acquire the TheraBreath(r) brand for $580 million in cash. The transaction, which is subject to regulatory approval and other customary conditions, is expected to close in the fourth quarter.

TheraBreath(r)'s net sales for the trailing twelve months through September 30, 2021 were approximately $86 million. TheraBreath(r) is the #2 brand in the alcohol-free mouthwash category in the United States. International represents less than 10% of net sales.

TheraBreath(r)'s trailing twelve months EBITDA as of September 2021 was approximately $27 million, with a 31% EBITDA margin. Once the business is fully integrated, Church & Dwight expects to leverage its distribution network, manufacturing footprint, and operating expertise to achieve an estimated $6 million in run rate operating synergies by 2023. The Company expects to expand TheraBreath(r)'s distribution through its international footprint.

"Oral care is important to us strategically," said Matthew T. Farrell, Church & Dwight Chief Executive Officer. "TheraBreath(r) represents a powerful addition to our existing oral care portfolio which includes ARM & HAMMER(r) toothpaste, SPINBRUSH(r) battery-operated toothbrushes, ORAJEL(r) oral analgesics and WATERPIK(r) water flossers. The TheraBreath(r) brand is a problem/solution product and one of the fastest growing brands in the mouthwash category. This acquisition gives Church and Dwight a strong position in a growing category with tailwinds as the brand skews towards younger consumers and consistently has a high level of brand loyalty and repeat purchase."

In 2022, TheraBreath(r)'s annual net sales are projected to grow approximately 15% to $100 million and adjusted EBITDA is expected to be $36 million, including $4 million of synergies. The adjusted 2022 EBITDA estimate excludes approximately $7 million in one-time transition and transaction related expenses.

Mr. Farrell continued, "We are excited about adding the Company's 14th power brand. This acquisition meets the Company's long-standing acquisition criteria: (1) #1 or #2 brand in a category; (2) asset-light; (3) a growing brand; and (4) expected to be gross margin accretive to the Company. Acquisitions have been a key driver of Church & Dwight's consistently strong shareholder returns."

The acquisition contains the benefit of a cash tax shield valued at $85 million. Net of the tax shield, the deal is a $495 million acquisition or a 13.7x multiple paid (based on $36MM of 2022 run rate EBITDA).

The acquisition is expected to be dilutive to the Company's 2021 EPS by ($.0.03), inclusive of transition costs, acquisition-related expenses, interest expense, and intangible amortization expense. The Company expects to finance the acquisition with debt.

Mr. Farrell said, "We now expect 2021 adjusted earnings per share (EPS) to be $2.96, inclusive of the $0.03 dilutive EPS effect of the acquisition. The acquisition is expected to be 2% accretive to cash earnings in 2022 and neutral to 2022 EPS, inclusive of transition costs, interest expense and intangible amortization expense."