Consumer Products Company to Be Split
Consumer products company Carter-Wallace Inc. on Tuesday agreed to sell itself in two pieces for a total of $1.12 billion, a lower-than-expected price that taught some investors a lesson about betting too aggressively on corporate valuations in the current economy.
Carter-Wallace, ending a yearlong process to find buyers for its many brands, will split its consumer brands--including Trojan condoms and Arrid deodorant--from its health business, after failing to attract a better offer for the entire company.
A venture of consumer goods maker Church & Dwight Co. and private equity group Kelso & Co. will buy Carter-Wallace’s consumer division for $739 million in cash.
The health-care units will be sold for $408 million to MedPointe Capital Partners, formed last year to build a specialty health-care business.
In total, Carter-Wallace shareholders will get about $20.30 a share--well below the $34 price the stock reached in December, and even below Monday’s closing price of $22.56. The stock (ticker symbol: CAR) tumbled $2.57 to $19.99 on the New York Stock Exchange.
Carter-Wallace, which last year hired J.P. Morgan Securities as its financial advisor, said Tuesday that the offers for the company in parts were the best it received.
“Carter had been trading under takeout speculation for awhile,” said Chris Braig, an analyst with National City Private Client Group. “These are mature, slow-growth products. People may have been a little optimistic.”
“Unfortunately for Carter holders, it shows what happens when the expectations and enthusiasm exceed the reality,” Tom Burnett, president of Merger Insight, a New York investment advisor firm, told Bloomberg Radio.
The transaction, expected to close by the end of September, is structured so that neither acquisition can be completed without the other, Carter-Wallace said.
CPI Development Corp., a holding company for Carter-Wallace management that controls about 83% of the voting power in the company, supports the transaction.
Carter-Wallace’s biggest outside shareholder, Mario Gabelli, whose Gabelli Asset Management and affiliates hold a 23.2% stake, last month said he opposed selling the company to a group of buyout firms.
Gabelli two weeks ago called for an “immediate postponement of the sale of the company” and urged Carter-Wallace to buy back $250 million of stock and split the company into two parts, in a letter to the firm’s chairman.
Gabelli didn’t return a call Tuesday seeking comment.
Carter-Wallace’s consumer products unit generated $541 million of sales last year, and its health-business revenue was $206 million.
The company’s brands also include Nair hair removal products and Pearl Drops tooth polish. The firm dates back to the late 1920s, when it sold Carter’s Little Liver Pills, a laxative now sold under the Carter name.
For Church & Dwight, which owns the Arm & Hammer baking soda product line, the purchase of Carter-Wallace’s deodorant and pet-care lines will help the firm expand internationally, it said. A 50-50 venture Church has formed with Kelso will take the other consumer lines.
Church’s shares (CHD) rose $1.02 to $24.94 on the NYSE.
MedPointe will get Carter-Wallace’s diagnostics and drug businesses, which make the allergy medicine Astelin, the muscle relaxant Soma and Rynatan/Tussi cough and cold products.
MedPointe was created by four pharmaceutical industry managers, led by Anthony H. Wild, former president of the pharmaceutical section of Warner Lambert Co.
The company should be making more acquisitions soon, said John H.T. Hawkins, another MedPointe partner. Hawkins is the former head of the health-care practice at Russell Reynolds Associates, an executive recruitment firm.
“Not too long ago, we were just four guys and an idea,” Hawkins said. “We should be evaluating other add-ons soon.”
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Bitter Pill
Shares of consumer products firm Carter-Wallace surged last year amid hopes the firm would fetch a high sale price, but a deal announced Tuesday was for much less than expected.
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Carter-Wallace shares on the NYSE, monthly closes and latest
Tuesday: $19.99, down $2.57
Source: Bloomberg News
