Playtex Products (NYSE: PYX) is having an especially heavy flow day, up almost 16% to a new 52-week high after Energizer announced it would acquire the company for $1.2 billion. Energizer has looked to stop the bleeding from its core products with a regular cycle of spotting available consumer product manufacturing targets. Aggressive periodic acquisitions have helped shares of Energizer double in the past year. Not known for its out of the box thinking (picking up an extra consumer staple here and there), Energizer's management was aided in this case by keeping its thinking strictly inside the box. Energizer's rationale, from Bloomberg:
"Energizer is interested in very well-known brands that can benefit from further operating and distribution improvement,'' said Bob Goldsborough, vice president of research at Chicago-based Ariel Capital Management LLC (Ariel is the company's largest investor and owned about 6.5 million Energizer shares as of July 10). "They hoped to diversify away from just batteries, but wanted to stay in categories that would be distributed at the same places.''
Along with diversifying its consumer product offerings, Energizer hopes to leverage the myriad of marketing synergies the Playtex deal provides. From now on, people will want to buy Playtex products for that period that keeps going, and going, and going...
Also, according to market research, girls have a much easier time putting something in their hooha when it has lagomorphic associations, (girls sure do love "The Rabbit," of Sex and the City fame).
The Playtex sale is a victory for Harbinger Capital, the company's largest institutional investor with a 20% stake. Fearing that the company was bloated by the extent of its product offerings, Harbinger has been pushing for Playtex to shed its extra bulk and focus on its most profitable divisions, or abort that strategy all together and seek a sale of the whole company.
Playtex was entertaining offers from Duracell, but worried about the potential health risks associated with a copper top.
Energizer to Buy Playtex Products for $1.2 Billion [Bloomberg]