Companies and Brands

Church & Dwight Buyout Takes It Closer to Larger Consumer Product Rivals

Church & Dwight Co. Inc. (NYSE: CHD) is trying to rectify its premium valuation with an acquisition. The consumer products company has traded at much higher valuations than its larger rivals like Procter & Gamble Co. (NYSE: PG) and Kimberly-Clark Corp. (NYSE: KMB).  The $7 billion consumer products company is spending some $650 million to acquire privately held Avid Health in an all cash transaction.

Today’s news takes C&D into the nutritional supplements market as a new growth platform via the private company’s gummy vitamins and Vitafusion and L’il Critters. C&D trades at a substantial premium to the consumer products sector, and while this deal is expected to dilute its 2012 earnings by only two-cents per share, it is expected to be accretive to earnings in 2013 ,and that in turn is expected to give it a slightly lower P/E ratio next year. The impact will only take earnings down to $2.39 to $2.41 per share this year, versus a Thomson Reuters consensus of $2.42 per share.

Avid’s sales were $230 million in the last 12-month period, and it is being funded by debt and cash on hand. C&D shares are bouncing on the news with a gain of 4% to $5.20 and its new market cap is listed as roughly $7.6 billion.

Based on yesterday’s close at $53.04, C&D traded at 19.9-times its expected 2013 earnings.  To show just how much premium is there, the 2013 forward P/E ratio is 17 for Procter & Gamble and just over 15 for Kimberly-Clark.

JON C. OGG

Find a Qualified Financial Advisor (Sponsor)

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.