January 2017

Prestige Brands to acquire C.B. Fleet

Prestige Brands Holdings, Inc. announced that it has entered into a definitive agreement to acquire C.B. Fleet Company, a manufacturer, marketer, and distributor of feminine care and other over-the-counter (“OTC”) healthcare products, for $825 million in cash. The transaction moves the company towards its stated goal of 85% “invest-for-growth” revenue and is expected to result in pro forma revenues of approximately $1.0 billion for the Company in Fiscal 2018.

summer-eve-webThe transaction will add leading brands to the company’s Women’s Health, Gastrointestinal and Pediatric Care categories with revenues of approximately $205 million over the trailing twelve months ended September. The portfolio is anchored by Summer’s Eve in Feminine Care, which represents approximately 65% of the Fleet portfolio, and holds a #1 market share position in its respective category. Introduced in 1972, Summer’s Eve has a long history of sales growth, consumer awareness, and product innovation. The Fleet brand holds a market-leading #1 share in both Enemas and Glycerin Suppositories, while Pedia-Lax holds a #1 share in Pediatric Laxatives.

The acquisition of Fleet is consistent with Prestige’s disciplined M&A criteria and offers opportunities for long-term brand-building and synergies as the Company expands its position in the Women’s Health and GI categories. In addition, Fleet operates a “mix and fill” manufacturing facility in Lynchburg, Virginia, which currently manufactures approximately two-thirds of Fleet’s sales. Over time, the Company expects to leverage the facility by expanding production to include current Prestige products and other initiatives. Upon closing, the transaction is expected to be immediately accretive to earnings per share and cash flow from operations, exclusive of transaction, integration and purchase accounting items.

Ron Lombardi, CEO of Prestige, stated, “Based on Fleet’s long history of connecting with consumers, new product expansions, and leading market-share positions we believe the company is well positioned for long-term growth and fits into our well-established brand building platform. The acquisition of Fleet further enhances our women’s healthcare platform, currently anchored by Monistat, with the addition of Summer’s Eve. Upon closing, Summer’s Eve will also be our largest brand with over $125 million in sales. In addition, the transaction adds the leading brands of Fleet and Pedia-Lax to our gastrointestinal category, expanding the brands we offer in this category.”

He added, “The acquisition is also a key step in aligning our portfolio with our long-term stated goal of 2-3% organic growth. We believe the addition of Fleet’s manufacturing facility also provides strategic benefits and cost synergies as we look to expand manufacturing to include current Prestige products. Over time, we also expect to take advantage of Fleet R&D resources to enhance our new product development capabilities.”

Mr. Lombardi concluded, “This acquisition is consistent with our proven M&A strategy that focuses on acquiring brands with long term brand building opportunities, including new products and innovations and quickly integrating them into the Prestige business, resulting in meaningful synergies and cost savings. The expected integration and transition is consistent with our past acquisitions and our demonstrated core competency of acquiring, integrating and growing business through investment and brand support.”

Financial Outlook

The Company anticipates closing on this transaction by the end of its fiscal fourth quarter of 2017, subject to satisfaction of customary closing conditions, including clearance under the Hart-Scott Rodino Antitrust Improvements Act of 1976.

Dependent on the timing of the closing, Prestige anticipates credit agreement defined pro forma Debt-to-EBITDA leverage at closing of approximately 5.8x, with an expectation to reduce its Debt-to-EBITDA leverage to approximately 5.0x by the end of Fiscal 2018. The anticipated Fiscal 2018 pro forma Adjusted EBITDA implies a purchase price multiple of approximately 11x. Prestige has secured a financing commitment for the full amount needed to consummate the transaction and may choose to fund a portion of the transaction with excess cash on hand, bank debt, bonds and/or common equity. The Company will be providing further detail on the transaction on its Fiscal 2017 third quarter earnings call in early February 2017.