The antitrust challenge by the FTC suit blocking the sale of Harry’s has derailed the $1.37 billion deal to merge Schick razor parent company Edgewell Personal Care with the direct-to-consumer razor start-up.
Edgewell announced its first-quarter fiscal 2020 results with flat organic net sales growth, representing further sequential top-line improvement, as well as 49% adjusted earnings per share growth. It also announced that following the U.S. Federal Trade Commission’s (“FTC”) lawsuit seeking to block the proposed transaction, Edgewell terminated its merger agreement with Harry’s, Inc.
The company said in the release, “After extensive consideration and discussion, and given the inherent uncertainty of a potential trial, the required investment of resources and time and the distraction that a continuing court battle would entail, we determined that proceeding with our standalone strategy is the best course of action for Edgewell and our shareholders. Edgewell is now moving forward as a standalone company and is pursuing its strategy to create value for shareholders.”
Shares of Edgewell Personal Care Co. EPC 27.53% rose nearly 28% Monday upon the news. According to the WSJ, “Investors had been wary of the deal due to the multiple Edgewell had agreed to pay for Harry’s, a company that was growing quickly but losing money. Monday’s gains pushed Edgewell’s total market value to about $2.1 billion.”
Edgewell said it will continue to develop its own direct-to-consumer efforts, which will take longer than acquiring Harry’s, and will continue to look for smaller brands to acquire.
“We’re out of the market for big transformational things. This was a unique opportunity for us here. But bolt-on M&A is absolutely part of the plan going forward,” Rod Little, Edgewell CEO, said on a conference call. In December the company sold its infant and pet-care business for $123 million in cash.
Harry’s has informed the company that it intends to pursue litigation. Edgewell believes that such litigation has no merit. In a joint statement, Harry’s co-founders and co-CEOs Jeff Raider and Andy Katz-Mayfield said they are “perplexed by the FTC’s process and disregard of the facts” and that they believe they would have won the FTC case. “We know the merger would have benefited consumers greatly. We believe we would have prevailed in litigation, and are disappointed by the decision by Edgewell’s board not to see this process to its conclusion,” they also said.
Photo: via Harry’s