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February 10, 2020

Razor deal collapses after FTC vows to block it

PHOTO | CONTRIBUTED A starter set from Harry's.
By Michelle Tuccitto Sullo

Edgewell Personal Care Co., which makes Schick and Wilkinson Sword razors, has abandoned its plans to acquire shaving competitor Harry’s Inc. 

The Shelton company announced that it would back out of the $1.37 billion deal on Monday, just days after the U.S. Federal Trade Commission filed litigation to block the acquisition.

The FTC claimed any such merger would “eliminate competition,” and likely raise razor prices for consumers. It also asserted that past rivalry between the companies had “spurred innovation.” The FTC formally commenced the civil action against the two companies in U.S. District Court for the District of Columbia on Feb. 3. 

Edgewell, headquartered on Research Drive in Shelton, has operations in Milford and around the world. The two companies had announced the proposed merger deal last May.

Edgewell’s leadership cited the FTC’s stance as its reason for terminating the merger agreement with Harry’s.

Rod Little, Edgewell's president and chief executive officer, said in an announcement that the company is “disappointed” by the FTC’s decision and disagrees with its position.

However, the company wishes to avoid potentially lengthy litigation and the possibility of an unfavorable outcome, according to Little.

"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," Little said in a news release.

However, Edgewell is facing litigation from another source, as Little indicated that Harry’s has informed Edgewell that it will pursue litigation.

Edgewell indicated that it believes any such litigation “has no merit.”

As it looks ahead, Edgewell is focused on moving forward and improving its performance and growth in its core categories, which include grooming, sun and skin care and feminine care. 

In addition to its razors, Edgewell is also the company behind Edge and Skintimate shaving preparations; Wet Ones moist wipes; feminine products under the Playtex, Stayfree, Carefree and o.b. brands;  and sun protection products, including Hawaiian Tropic, Bulldog and Jack Black. The company sold off its infant and pet care divisions in December for $122.5 million. 

When Edgewell and Harry’s first announced the deal, they had anticipated it closing in the first quarter of 2020.

After the FTC announced its plans to block the merger, Jeff Raider and Andy Katz-Mayfield, co-founders and co-CEOs of Harry's, expressed disappointment. The Harry’s brand is well-known for its affordable products and slogan, “You deserve a great shave at a fair price.”  

On Monday, Raider and Katz-Mayfield issued the following statement via email: "We continue to be perplexed by the FTC's process and disregard of the facts. 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. We are also proud of what we've built at Harry's and we are stronger than ever; we're growing, profitable, well capitalized and excited about the opportunities ahead for our business. Moving forward, we will continue to do what we do best: develop, manufacture and sell exceptional products at an honest price, and always put our customers first."

Little, meanwhile, said he thanks both men for the efforts they put in toward pursuing the deal.

“Having said that, we will now move forward with urgency to further strengthen our business, refine our strategic priorities and create sustainable shareholder value,” Little said.

Daniel Francis, deputy director of the FTC's Bureau of Competition, said in a statement Monday that it is pleased with Edgewell's decision.

"For years, Edgewell and Procter & Gamble faced little competition on store shelves, and prices rose steadily as a result," Francis said. "The arrival of Harry’s into brick-and-mortar retail disrupted that pattern, bringing lower prices and more options to consumers. Allowing Edgewell to bring that disruptor under control by acquiring Harry’s would have represented a big step back for competition. This outcome is good news for consumers across the country.”

Edgewell reported net sales of $454 million for the first quarter of fiscal 2020, a decrease of 0.7 percent compared to the same period for 2019.

As of Monday afternoon, Edgewell’s stock (EPC) was trading at $37.86. In the past 12 months, it reached a high of $46.55 and low of $25.43.

Contact Michelle Tuccitto Sullo at msullo@newhavenbiz.com.

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