Church & Dwight Is Buying Acquire Hero for $630 Million

Big news today from Church & Dwight (CHD). The company is buying Acquire Hero for $630 million. Acquire Hero owns the Mighty Patch brand.

Mighty Patch® is the #2 brand in the acne category in the United States and the #1 patch brand in acne. The transaction, which is subject to customary closing conditions, is expected to close in the fourth quarter.

Hero’s net sales for the trailing twelve months through June 30, 2022 were approximately $115 million. The acne patch is the fastest growing treatment form in acne. The products are currently only marketed in the U.S.

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Hero’s trailing twelve months EBITDA as of June 30, 2022 was approximately $45 million, with a 40% EBITDA margin. Church & Dwight expects to expand Mighty Patch®’s limited distribution by leveraging its US retailer relationships and international footprint.

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2022 Outlook

Regarding the 2022 Outlook, Mr. Farrell commented, “We now expect full year reported sales growth of 2% to 4% (previously 4% to 5%), reflecting the incremental growth from Hero offset by continued softness across our more discretionary brands.

For Q3, we now expect reported sales to decline -1% (previously growth midpoint of 3%) reflecting lower demand for Waterpik, Vitafusion and Flawless. EPS affirmed at $0.65 (no change to previous Outlook).

The acquisition is expected to be dilutive to the Company’s 2022 EPS by ($0.05), inclusive of transition costs, acquisition-related expenses, interest expense, intangible amortization expense, and incremental marketing. We now expect 2022 adjusted earnings per share (EPS) to be $2.97, inclusive of the $0.05 dilutive EPS effect of the acquisition. In addition, adjusted earnings in 2022 and 2023 will exclude the impact of $0.03 and $0.11, respectively, to exclude charges related to the restricted stock which will be treated as compensation.

Looking forward to 2023, the acquisition is expected to be 3% accretive to cash earnings and neutral to adjusted 2023 EPS, inclusive of transition costs, interest expense and intangible amortization. In 2023, Hero’s annual net sales are projected to grow approximately 15% to $150 million.”

Posted by on September 6th, 2022 at 8:44 am


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