Church & Dwight to Acquire TheraBreath Brand for $580M

Household products manufacturer Church & Dwight Co., Inc. (CHD) revealed that it has entered into a definitive agreement to acquire an oral care products brand, TheraBreath, for $580 million. The deal is likely to close in the fourth quarter of 2021. The company will finance the deal through debt.

Following the news, shares of the company rose marginally to close at $93.75 on Monday.

Implications of the Deal

The acquisition will enable Church and Dwight to gain a strong foothold in the alcohol-free mouthwash category with TheraBreath, which is a prominent player in the space. With its strong distribution network, manufacturing footprint and operating expertise, Church & Dwight expects to achieve synergies of about $6 million by 2023.

TheraBreath witnessed net sales of about $86 million for the trailing twelve months through September 30, 2021, with an EBITDA of $27 million in the same period.

Further, TheraBreath’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 in 2022.

However, the buyout is likely to be dilutive to Church and Dwight’s 2021 EPS by a negative $.0.03 per share.

Management Commentary

The CEO of Church & Dwight, Matthew T. Farrell, said, “TheraBreath® represents a powerful addition to our existing oral care portfolio which includes ARM & HAMMER® toothpaste, SPINBRUSH® battery-operated toothbrushes, ORAJEL® oral analgesics and WATERPIK® water flossers. The TheraBreath® 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.”

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Price Target

On November 29, Stifel Nicolaus analyst Mark Astrachan reiterated a Hold rating on the stock. The analyst, however, raised the price target from $89 to $92, which implies downside potential of 1.9% from current levels.

Consensus among analysts is a Hold based on 1 Buy, 4 Holds and 2 Sells. The average Church & Dwight price target of $89.83 implies downside potential of 4.2% from current levels. Shares have gained 6.8% over the past year.

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