When Energizer Holdings Inc. said in July it would pay $1.9 billion for Playtex Products Inc., its CEO Ward Klein warned earnings could take a hit in the first, and possibly second, quarter after the deal's close. Earlier this week the company r
eleased results for the quarter ending Dec. 31, the first report since the deal closed on Oct. 1, and the blow was worse than expected. But Klein nevertheless said he was pleased, and he reiterated the purpose for the deal: advancing Energizer's drive to build a new personal-care division to complement its household products unit.
The personal-care drive got underway in 2003 when Energizer acquired the Schick shaving products business, which it paid Pfizer Inc. $930 million for so it could sell razors through its battery distribution channels. Over time Energizer's personal-care business (wet shave, skin care, feminine care and infant care) will be on scale with its household goods business (battery and lighting products), Klein has said. One goal for Playtex is to boost sales by moving its products through Energizer's global distribution channels. It's a strategy that has parallels (but also contrasts) with those employed by the other big sellers of batteries: Spectrum Brands Inc., formerly Rayovac, which combines batteries with Remington electric razors but also lawn and garden products; and giant Procter & Gamble Co., which got Duracell in its huge deal for Gillette in 2005, but according to recent reports may sell it.
So what were Energizer's results? Earnings were $1.74 per share, down from Wall Street estimates of $2.20, the company's hometown St. Louis Post-Dispatch tells us. Playtex was mainly responsible for a jump in sales to $400 million from $235.5 million in the year-ago period. The shortfall included a 26 cent per share after-tax charge for the writeup and subsequent sale of Playtex inventory, according to the paper.
But as the (admittedly much larger) $57 billion P&G deal for Gillette Co. shows, it does take time to sort these things out. Two years after it was announced, integration is now just about wrapped up, according to Reed Business Information's Purchasing.com. Procurement integration was a big challenge because of the sheer size of the task. Integration of procurement technology is now about 95% complete, chief procurement officer Rick Hughes noted in the piece. Merging the supply bases of the two companies was another major task.
In February 2006, based on remarks by P&G's CFO, Reuter's reported: "While the integration of Gillette was a drag on profit in the fiscal second quarter, it affected earnings by much less than P&G had previously expected."
In Energizer's latest earnings release Klein expressed optimism about his strategy, but noted that fiscal 2008 will be a transition year as the integration of Playtex continues. If all goes well, perhaps he'll have a positive surprise to report in a year or so. - Carolyn Murphy
See story from St. Louis Post-Dispatch
See Purchasing.com story
See TheDeal.com story on Energizer-Schick
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