Church & Dwight rises after agreeing to buy AvidThe Associated Press
NEW YORK -- Shares of Church & Dwight Co. rose Tuesday after the company said it will buy vitamin maker Avid Health.
THE SPARK: Church & Dwight said Monday that it will buy Avid for $650 million in stock. Avid's products include Vitafusion gummy vitamins for adults and Lil' Critters gummy vitamins for children. Church & Dwight said Avid had about $230 million in revenue over the 12 months ended June 30.
THE BIG PICTURE: Church & Dwight is a consumer products company based in Princeton, N.J. Its brands include Arm & Hammer laundry detergent, OxiClean products, high-tech cat litters, musical children's toothbrushes, Trojan condoms, and vibrators. The company said its revenue grew 6 percent to $2.75 billion in 2011.
Church & Dwight said the purchase will add to its net income and free cash flow start in 2013, and by 2014 it expects $15 million in annual savings from the deal.
THE ANALYSIS: BMO Capital Markets analyst Connie Maneaty praised the deal and kept a "Market Perform" rating on Church & Dwight stock.
"We are encouraged that Church & Dwight has finally found an acquisition target to leverage its strong balance sheet," Maneaty wrote.
Citi Investment Research analyst Wendy Nicholson said the price of the deal may be "a bit rich," and she is not sure Avid's vitamins fit with Church & Dwight's current mix of products. Nicholson wrote that Church & Dwight's business is being hurt by greater sales of low-profit-margin household products, and the company hopes that Avid will help reverse that trend.
SHARE ACTION: Church & Dwight shares gained $2.71, or 5.1 percent, to $55.75 in afternoon trading. The stock is down 4.8 percent since Church & Dwight reported its second-quarter results on Aug. 7, but even with that slump, the shares were up 15.9 percent in 2012 going into Tuesday's trading day.