Dear Matthew Farrell and directors of Church & Dwight's board: If a suitor does come calling, play hard to get. Play really hard to get.
For some time, this consumer-products company has been flourishing without much attention. While its brands such as Arm & Hammer baking soda and Trojan condoms are all well known, the Ewing, New Jersey-based parent company is probably less recognizable to consumers and those investors not focused on the space. But this week, it was thrust into the spotlight.
The stock climbed to a record after Spanish news site Negocios said that Reckitt Benckiser was planning to make a $23 billion offer next week for the $12 billion company (hello, massive premium). There's also been speculation that Procter & Gamble or Henkel may be interested. But on Thursday, Church & Dwight said that recent reports aren't true:
"The company is not engaged in discussions with, nor has it received any proposal or communication concerning a potential bid...and is not otherwise aware of any information supporting these rumors."
Companies tend to use vague language when pressed to address M&A rumors, but this seems like a pretty firm denial. That said, takeover interest in Church & Dwight still makes entirely too much sense to go unaddressed. So here's a run-down of what you need to know about the company, in case, you know, any suitors are in the wings:
- There was a leadership change this year. James Craigie, long-time CEO of Church & Dwight, retired and was replaced by Farrell, the former finance and operations chief. (Craigie is still chairman of the board.) Farrell also gets a nice payout to the tune of $5.8 million should he lose his job in the event the company gets acquired, according to Bloomberg's executive compensation number crunchers.
- Church & Dwight has been making smart tuck-in acquisitions in personal-care products, such as Vitafusion gummy vitamins and Batiste dry shampoo, bringing its revenue closer to an even split between this segment (the faster-growing end of the consumer-goods industry) and household items, such as OxiClean detergents. Arm & Hammer remains its most important brand and is used in a host of products.
- Given its U.S. slant, the business has been largely protected from currency headwinds eating into rivals' profits lately.
- Like most large companies these days, organic growth has slowed. But Church & Dwight is also an extremely steady and predictable business, which adds to its takeover appeal, something I pointed out in March.
In other words, there's a lot for a buyer to like.
Price is where any potential acquisitions talks could break down. Church & Dwight already fetches a richer price-earnings multiple than Reckitt, P&G, Henkel, Clorox (formerly a speculated merger partner for Church & Dwight) and most of the other consumer-products giants. And there's certainly no urgency for Church & Dwight to sell.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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