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Energizer increases cosmetics footprint with Playtex buy

By Simon Pitman , 16-Jul-2007

Consumer goods player Energizer has extended its position in the personal care market with the acquisition of Playtex Products, building on its presence in the sector with the Schick-Wilkinson Sword brand.

Energizer, which is best known as a manufacturer and marketer of household batteries, bought the Schick shaving products business back in 2003 and now plans to diversify its business by further expanding into personal care.



The company said it will pay $18.30 a share for Playtex, which values it at $1.9bn - an offer that puts it around 20 per cent above the market value according to the share closing price last Thursday, July 12.



The acquisition was approved unanimously by the Energizer board of directors and the company stated that the transaction will be funded by existing cash funds as well as new credit facilities.



"Playtex has strong consumer brands, most of which have #1 or #2 market positions, in stable or growing personal care categories. Its products enjoy healthy margins with strong, predictable cash flows, similar to our existing stable of consumer and personal care products," said Ward Klein, CEO of Energizer.



Klein went on to stress the fact that Playtex's existing distribution channels in Canada and the US - where Playtex does over 90 percent of its business - would be particularly beneficial, adding that he is expecting that its addition should also help to create synergies that should lead to cost reductions.



"It will also provide a platform for possible additional value-adding acquisitions," Klein added.



Share prices had already risen during the course of the week, as rumors of the deal began to circulate around the financial markets, but analysts believe the acquisition price is indicative of the value of the company, especially given Playtex's recent acquisition of leading sun care brand Hawaiin Tropic.



The brand was bought in the spring of this year for $83m and the acquisition is expected to bring in additional sales of at least $110m during the course of the next year.



Energizer had originally bought the Schick-Wilkinson brand, envisaging cross-over with its battery brand for powered razors as well as the fact that it already has a strong presence in the household good category.



However, with the company now firmly established as the brand holder for the world's second largest wet shavings products business, the Playtex acquisition is a logical step for it to expand its footprint in the personal care business.



As Energizer is a much bigger company than Playtex Products - with an annual turnover of $3.25bn, as opposed to Playtex Products' annual turnover of $636.1m - this means there should be greater resources to develop the existing brands in the portfolio.



Currently the Playtex brands center on skin car products, which have also proved to be the most profitable for the company. As well as Hawaiin Tropic, its sun care brands includes Banana Boat, which are the main driving force behind total skin care sales that acount for 37 percent of total revenues.



The company also specializes in feminine care products, with the Gentle Glide and Sport tampon range helping to push sales for this division to 35 percent of total turnover, whereas infant care products, which include bottles, cups, pacifiers and diapers, account for the remaining 28 percent of sales.

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