Deals

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

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.

Take Me to Church
Church & Dwight's stock has been beating peers. Since May 2011, it's more than doubled, while a basket of household- and personal-products makers in the S&P 500 advanced only about 30 percent.
Source: Bloomberg

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.  
Small But Steady Gains
As growth in household products stagnates, Church & Dwight has been expanding its roster of personal-care items through acquisitions. Shareholders have so far liked this strategy.
Source: Bloomberg

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.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net