Kimberly-Clark (KMB) has announced that it has entered into a definitive agreement to acquire Softex Indonesia, a key player in the fast-growing Indonesian personal care market, in an all-cash $1.2B transaction from a group of shareholders including CVC Capital Partners Asia Pacific IV.
“This acquisition represents a compelling strategic fit and demonstrates our commitment to accelerate growth in developing and emerging markets,” said Mike Hsu, CEO of Kimberly-Clark.
“Moreover, adding Softex Indonesia and its brands to Kimberly-Clark will enhance our company’s underlying growth prospects and help us create even more long-term shareholder value” he added.
Indonesia is a large, growing market with attractive future prospects, says KMB, and the acquisition immediately improves Kimberly-Clark’s currently limited position in the country to one with strong market share in key personal care categories across Southeast Asia’s largest economy.
The diaper market in Indonesia is currently estimated at $1.6 billion, the sixth largest in the world, with approximately five million annual births. Approximately 80% of Softex Indonesia sales come from diapers, and it currently holds the number two market share position with the Sweety and Happy Nappy brands while continuing to grow its market presence.
The remaining Softex Indonesia sales are mostly in the feminine care and adult care categories. In feminine care, the company holds the number three market share position with the Softex brand. In adult care, it holds the number two market share position with the Confidencebrand. The company generated net sales of approximately $420 million in 2019.
Excluding one-time transaction and integration costs, the acquisition’s impact on adjusted earnings per share in 2020 and 2021 is expected to be immaterial, says KMB. The transaction, which is set to close in early Q4 2020, will be financed primarily through incremental debt and secondarily cash on hand. (See KMB stock analysis on TipRanks).
Shares in KMB are up 11% year-to-date and the stock scores a cautiously optimistic Moderate Buy Street consensus. That’s with an average analyst price target of $159 (5% upside potential).
RBC Capital’s Nik Modi has a hold rating on the stock, but recently ramped up his price target from $149 to $156. “While we are believers in Kimberly-Clark’s growth story, we think the company is fairly valued at this time, as it trades in line with its consumer staples mega-cap peers” the analyst explained.