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Church & Dwight (CHD) Boosts Portfolio With ZICAM Brand

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Church & Dwight Co., Inc. CHD recently informed about the buyout of Matrixx Initiatives, Inc. for $530 million. Matrixx Initiatives is the owner of the ZICAM brand, which is the #1 zinc supplement across the United States in the VMS (vitamins, minerals and supplements) cold-reducing category.

ZICAM, which is an asset-light and flourishing brand, reduces cough/cold duration with the help of zinc as a key active ingredient. The addition of the ZICAM brand reinforces Church & Dwight’s existing portfolio and fits its long-standing buyout criteria. This buyout is likely to prove accretive to gross margin and will add nearly 3% to its cash earnings in 2021. However, the acquisition will remain neutral to earnings per share in fourth-quarter 2020 and in 2021 owing to intangible amortization, interest and transition expenses as well as increased marketing expenditure.

Encouragingly, the ZICAM brand’s net sales and EBITDA are likely to be about $90 million and $36 million, respectively, in 2021. After the complete integration of ZICAM, Church & Dwight anticipates leveraging its distribution network, operating control, and support functions, to deliver estimated annual cost savings of nearly $5 million by 2022.

Notably, the addition of the ZICAM brand represents the company’s 13th power brand. The company boasts power brands, including ARM & HAMMER, Trojan, OxiClean, Spinbrush, First Response, Nair, Orajel, Xtra, L’IL CRITTERS and VITAFUSION, WATERPIK, FLAWLESS and Batiste, which represents majority of its consumer sales.
 
We note that Church & Dwight has a long history of acquisitions. The company, which started with only one brand, i.e. ARM & HAMMER, has taken over a number of significant brands over time which has been contributing considerably to its top line. In this regard, the buyout of FLAWLESS has been a prudent addition to Church & Dwight’s portfolio. The brand is poised to keep gaining from rising at-home grooming trends. Further, in another release, Church & Dwight’s beauty label Finishing Touch Flawless revealed renowned actor and activist, Halle Berry, as a collaborative partner. This is likely to bolster the brand’s presence.

Impressively, the Zacks Rank #3 (Hold) company’s shares have appreciated 26.3% so far this year compared with the industry’s growth of 28%.

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Lamb Weston Holdings LW has a long-term earnings growth rate of 7% and a Zacks Rank #2.

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