Schick Parent Buys Harry’s, Inc. for $1.37 Billion in Cash-Stock Deal
Harry’s co-founders and co-CEOs will join executive team to lead U.S. operations
Last week, Edgewell Personal Care Company (NYSE: EPC), parent company to brands including Schick, Edge, Skintimate, Wet Ones and Hawaiian Tropic, added another brand to its family of products – Harry’s, Inc. – for $1.37 billion in a cash and stock deal. Founded in 2013 by Andy Katz-Mayfield and Jeff Raider, Harry’s is a direct-to-consumer shaving subscription startup with a factory in Germany and headquarters in New York City. In the U.S., Harry’s razors and related personal care products are available via subscription as well as in retail stores.
Under the agreement, about 79% of the sale price will be paid to Katz-Mayfield and Raider in cash with the balance to be paid in common stock. After the transaction, Harry’s shareholders will own approximately 11% of Edgewell. Both boards of directors have approved the transaction. Edgewell will finance the deal through existing cash, new debt and equity. Subject to regulatory approval, the deal is expected to close by the end of the first calendar quarter of 2020. As part of the deal, Harry’s co-founders and co-CEOs will join the executive team as co-presidents of U.S. operations.
“The combination of Edgewell and Harry's is a pivotal step forward in further transforming our organization and strengthening our competitive position and ability to drive sustained growth and value creation,” said Rod Little, Edgewell president and CEO, in a May 9 news release.
“Building on Edgewell's and Harry's complementary strengths, our combined company will have leading brands and omni-channel capabilities that are essential to meet the needs of the modern consumer and win in today's market environment. We welcome Harry's entrepreneurial employees and look forward to working closely with Andy and Jeff, whose ingenuity and demonstrated success will enable us to take our U.S. business to the next level. We are excited about our future and the opportunities we have to deliver superior long-term shareholder returns as a next-generation CPG1 platform,” Little added.
1Editor’s note: CPG stands for consumer packaged goods.
Katz-Mayfield and Raider also commented on the deal.
“When we launched Harry's six years ago our vision was to create a grooming brand that better met our needs as consumers, and over time, a CPG platform that creates brands people love across more categories. Together with Edgewell, we see a significant opportunity to continue delivering on that vision, leveraging Edgewell's advanced technology and global footprint alongside our customer-first approach, brand building expertise and omni-channel capabilities. We're incredibly proud of the brands we've created and the team we've built and have tremendous respect for Edgewell and its established brand portfolio. We look forward to what we can accomplish together,” the Harry’s leaders said.
In the news release, Edgewell and Harry’s outline what they believe the benefits of a merger are:
- Strengthening the Edgewell brand portfolio and scaling Harry’s operations. Edgewell operates in more than 50 markets and has approximately 6,000 employees worldwide. Harry’s employs more than 900 people in the U.S., U.K. and Germany.
- Capitalizing on Harry’s strength in brand positioning and appealing to a broader, more diverse set of consumers. In addition to Harry’s shaving products for men, Harry’s also owns Flamingo which offers shaving and waxing products for women.
- Leveraging cost and revenue synergies – The companies estimate $20 million of EBITDA in annual cost savings by 2023.
- The combined company is estimated to generate $200 million to $300 million of annual organic free cash flow.
Prior to the Harry’s acquisition, Harry’s held seven previous funding rounds, raising a total of $375.2 million from 20 investors, according to Crunchbase. The most recent funding round was a Series D round in December 2017.
A similar deal was struck in 2016 when Unilever acquired Dollar Shave Club for $1 billion in an all-cash sale.
Startups like Harry’s have made names for themselves by identifying a consumer need and filling it. In the case of Harry’s, it was providing shaving products to men and women and making it easy to order and purchase their products on a schedule. Once the subscriber sets up an account, they choose the products they want and the frequency in which they want them, with the ability to make adjustments as needed. As the popularity of subscription products has grown, consumers have fallen in love with the ease and convenience of direct-to-consumer products.
Large companies like Edgewell have been watching companies like Harry’s and seen how they have grown their smaller companies by gradually scaling up to meet consumer demand. This model could potentially be adapted to Edgewell’s audiences, and they can learn a lot from Harry’s executive team to create a direct-to-consumer niche for themselves. There are a lot of exciting possibilities here for Edgewell and Harry’s.