Edgewell Deal for Harry's Razors Will Only Nick Gillette -- At First


(Bloomberg) -- Razor-maker Edgewell Personal Care Co. just made a bold bet in the market dominated by Gillette. But it’s not just about shaving.

Schick-owner Edgewell agreed Thursday to buy upstart Harry’s Inc. in a deal valued at $1.37 billion -- almost as big its own market value of about $1.8 billion. With Harry’s, Edgewell is not only getting a fast-growing U.S. shaving brand but also a direct-to-consumer model that it can bring to its other personal-care products, which include household names like Banana Boat and Wet Ones.

“If we get it right -- and we’re confident we will -- we will be a serious player in this category,” Edgewell Chief Executive Officer Rod Little said on a call alongside Harry’s co-founders Andy Katz-Mayfield and Jeff Raider.

The executives declined to discuss how the merged company will stack up against grooming leader Procter & Gamble Co.’s Gillette, which Euromonitor International says has 49% of the global men’s shaving market. Edgewell’s Schick, Wilkinson Sword and Edge shave gel businesses make up just over 10% of the segment, while Harry’s has just 0.5% market share, meaning even the combined power won’t be much of a risk to Gillette in numbers alone, even when you take into account Edgewell’s strong private-label business.

P&G Leader

The true competitive threat lies in the combination of Edgewell’s scale with Harry’s direct-to-consumer business model. Marketing and software firm Redpoint Global has found that in the consumer products space, around 82% of brands say selling direct-to-consumer has improved their customer relationships.

“By combining the brand affinity of Harry’s, that will enable Edgewell to have a better individualized view of the consumer and allow them to deliver a more personalized experience,” said Patrick Tripp, Redpoint’s vice president of product strategy. “Personalization is so crucial in today’s world.”

Investors weren’t wild about the acquisition, with shares of the company sinking as much as 18%, dropping to their lowest in more than a decade after it took the market by surprise. Still, Wells Fargo’s Bonnie Herzog says strategically the tie-up makes sense.

Shave Deals

The deal with Edgewell comes amid increasing consolidation in the razor market, following Unilever’s purchase of Dollar Shave Club in 2016 and P&G’s recent acquisition of Bevel. Meanwhile, Harry’s -- while still small -- is the fastest growing men’s shaving brand in the U.S. with sales more than doubling last year, according to Euromonitor analyst Andrew Stablein.

Edgewell’s Schick shave products date to 1921, and it combined with Wilkinson Sword in 1992. The company didn’t branch out into personal care until 2007, when its corporate predecessor, Energizer Holdings Inc., agreed to buy Playtex, bringing suncreens, diaper genie and o.b. tampons to the business. In 2015, Energizer spun off its battery business and the personal care products remained, becoming Edgewell as it’s largely known today. Including its private-label brands, Edgewell is the U.S.’s top seller of razor blades by volume, Little said.

The current deal started to come together last summer, when Little, then chief financial officer, met Harry’s co-founders. “We at Edgewell were going through a transformation, and they were looking to grow and expand,” Little said. Talks accelerated in the last few months, after Little became Edgewell’s CEO earlier this year.

Harry’s CEOs Katz-Mayfield and Raider -- who will become co-presidents of U.S. operations at Edgewell -- declined to specify whether they’d held formal talks with other companies, though Katz-Mayfield did confirm Harry’s had "different propositions over time.” This particular deal made sense because Edgewell had something other potential partners didn’t, Katz-Mayfield said: “Edgewell shared our vision for what a next generation consumer products company would look like.”

©2019 Bloomberg L.P.

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