Why Church and Dwight (CHD) Is Buying TheraBreath For $580 Million

By Dan Anderson ● Nov 30, 2021
  • Church & Dwight Co., Inc. (NYSE: CHD) recently announced it signed a definitive agreement to buy the TheraBreath brand for $580 million in cash. These are the details.

Church & Dwight Co., Inc. (NYSE: CHD)  recently announced it signed a definitive agreement to buy the TheraBreath brand for $580 million in cash. The deal – which is subject to regulatory approval and other customary conditions – is expected to close in the fourth quarter.

TheraBreath’s net sales for the trailing 12 months through September 30, 2021 were approximately $86 million. And TheraBreath is the number two brand in the alcohol-free mouthwash category in the United States. International represents less than 10% of net sales.

TheraBreath’s trailing 12 months EBITDA as of September 2021 was approximately $27 million with a 31% EBITDA margin. And once the business is fully integrated, Church & Dwight expects to leverage its distribution network, manufacturing footprint, and operating expertise to achieve an estimated $6 million in run rate operating synergies by 2023. Plus the company expects to expand TheraBreath’s distribution through its international footprint.

Next year, 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. And the adjusted 2022 EBITDA estimate excludes approximately $7 million in one-time transition and transaction related expenses.

The acquisition contains the benefit of a cash tax shield valued at $85 million. And net of the tax shield, the deal is a $495 million acquisition or a 13.7x multiple paid (based on $36MM of 2022 run rate EBITDA).

The acquisition is expected to be dilutive to the company’s 2021 EPS by ($.0.03), inclusive of transition costs, acquisition-related expenses, interest expense, and intangible amortization expense. And the company expects to finance the acquisition with debt.

KEY QUOTES:

“Oral care is important to us strategically. 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.”

“We are excited about adding the Company’s 14th power brand. This acquisition meets the Company’s long-standing acquisition criteria: (1) #1 or #2 brand in a category; (2) asset-light; (3) a growing brand; and (4) expected to be gross margin accretive to the Company. Acquisitions have been a key driver of Church & Dwight’s consistently strong shareholder returns.”

“We now expect 2021 adjusted earnings per share (EPS) to be $2.96, inclusive of the $0.03 dilutive EPS effect of the acquisition. The acquisition is expected to be 2% accretive to cash earnings in 2022 and neutral to 2022 EPS, inclusive of transition costs, interest expense and intangible amortization expense.”

— Matthew T. Farrell, Church & Dwight Chief Executive Officer