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Church & Dwight (CHD) Inks Deal to Acquire TheraBreath Brand

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·5 min read
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  • CHD
  • NWL
  • PG
  • CLX

Well-known personal care and household products company, Church & Dwight Co., Inc. CHD, continues to expand its portfolio through prudent acquisitions and product innovations. Progressing on these lines, the company entered into an agreement to acquire TheraBreath, a leading brand in the mouthwash category. The deal is valued at $580 million in cash and is expected to close during fourth-quarter 2021. Let’s take a closer look at this development and other efforts by the company.

Acquisitions Aid in Strengthening Portfolio

TheraBreath is expected to be a lucrative inclusion to Church & Dwight’s oral care portfolio. The company’s oral care offerings have continued to be strategically valuable and have been aiding growth. The company’s oral care category houses well-known brands like ARM & HAMMER toothpaste, SPINBRUSH battery-operated toothbrushes, ORAJEL oral analgesics and WATERPIK water flossers.

TheraBreath is among the top brands in the alcohol-free mouthwash category in the United States. The brand is quite popular among younger consumers and has high brand loyalty and repeat purchases. TheraBreath will become Church & Dwight’s 14th power brand and is expected to boost the company’s position in the growing oral products category.

Management informed that TheraBreath’s net sales in the trailing 12-month period, through Sep 30, 2021, amounted to nearly $86 million. The brand’s EBITDA during this period were nearly $27 million, with a 31% EBITDA margin. Church & Dwight expects to expand TheraBreath’s distribution capabilities. Upon completely integrating the brand, the company anticipates generating $6 million in run-rate operating synergies by 2023. This is likely to be achieved by leveraging the brand’s distribution network, manufacturing footprint and operating expertise. In 2022, TheraBreath’s annual net sales are expected to grow approximately 15% to $100 million, while adjusted EBITDA is expected to be $36 million, including $4 million of synergies.

The company expects to finance the acquisition through debt. The deal is expected to be dilutive to the company’s earnings per share by 3 cents. Management now expects adjusted earnings to be $2.96 per share. For 2022, the buyout is expected to be 2% accretive to cash earnings and neutral to the bottom line.

Acquisitions have been a key driver in boosting Church & Dwight’s market presence. The company acquired a number of brands that generally hold number-one or number-two positions in its category with high margins and have been contributing significantly toward top-line growth. The buyout of FLAWLESS and WATERPIK have been prudent additions to Church & Dwight’s portfolio, which are also key subsidiaries of the company. Another noteworthy acquisition of the company includes Batiste. In December 2020, the company took over Matrixx Initiatives, which owns the ZICAM brand. Markedly, Zicam is a leading zinc supplement in the United States in the vitamins, minerals and supplements (VMS) cough/cold shortening category. Regular innovations help the company improve brand positions and market share.

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Zacks Investment Research

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Wrapping Up

Church & Dwight has been witnessing a significant increase in demand for its products, especially in household and personal care categories amid the pandemic. Consumers’ continued adherence toward maintaining good hygiene is likely to keep driving the company’s performance in the forthcoming periods. Efforts to boost brand strength will likely enable the company to meet demand conditions.

This Zacks Rank #3 (Hold) company’s shares have increased 12.1% in the past three months compared with the industry’s rise of 0.9%.

How Other Consumer Staples Stocks are Faring

Consumer goods giant The Procter & Gamble Company PG has been gaining from strong organic sales growth, backed by continued demand for home and fabric care, oral care, health care, grooming and beauty products. Procter & Gamble, which currently carries a Zacks Rank #3, has been witnessing increased consumer demand for its hand soaps, detergents and surface cleaning products since the onset of the pandemic. PG is progressing with its five-year restructuring plan, which mainly targets cost cutting in areas like supply chain and marketing.

Procter & Gamble’s shares have returned 4.3% in the past three months. The Zacks Consensus Estimate for current fiscal-year sales and earnings indicate growth of 4.3% and 4.8%, respectively. PG has a long-term earnings growth rate of 6.7%.

Newell Brands Inc. NWL, carrying a Zacks Rank #3, is a global manufacturer and marketer of consumer and commercial products. The company has been gaining from solid demand and product innovation. Newell Brands’ e-commerce sales have been gaining traction. Continued improvement in NWL’s Writing Business, driven by a strong back-to-school season, is also an upside.

Newell Brands expects consumption trends to remain strong in the forthcoming periods. The Zacks Consensus Estimate for current fiscal-year sales indicates growth of 11.4%. NWL has a trailing four-quarter earnings surprise of 40.9%, on average.

The Clorox Company CLX is gaining from improved demand conditions across its portfolio. The company’s strategic initiatives — pricing actions, cost-reduction efforts, increased focus on building supply-chain resiliency and enhanced productivity — have been yielding. Clorox is witnessing strong progress in its core international business. CLX has been investing to boost digital capabilities

Clorox currently carries a Zacks Rank #3. Shares of the company have inched up 0.6% in the past three months. CLX has a trailing four-quarter earnings surprise of 5.5%, on average. The company has a long-term earnings growth rate of 7%.


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