The highly fragmented U.S. natural personal care market represents about $6.4 billion in sales and is currently growing at about 9 percent annually. Founded in 1984, the Burt’s Bees brand today is regarded among many consumers who purchase natural personal care products as the “most natural” personal care brand and as the leading natural brand in the U.S. The acquisition of Burt’s Bees is strongly aligned with Clorox’s Centennial Strategy to pursue growth in areas aligned with consumer “megatrends” in health and wellness, sustainability, convenience and a more multicultural marketplace.
“This acquisition allows us to enter a growing market that’s consistent with consumer megatrends,” said Clorox chairman and CEO Donald R. Knauss. “With this transaction, we’re entering into a new strategic phase for our company, enabling us to expand further into the natural/sustainable business platform. The Burt’s Bees brand is well-anchored in sustainability and health and wellness, and we believe it will benefit from natural and 'green' tailwinds. It’s in an economically attractive category with a margin structure that will be highly accretive to Clorox. Combined with our new Green Works line of natural cleaning products, and Brita water-filtration products, we can leverage Burt’s Bees’ extensive capabilities and credibility to build a robust, higher-growth platform for Clorox.”
Beth Springer, Clorox’s executive vice president – Strategy & Growth, who will oversee the business, said, “Burt’s Bees is a compelling strategic fit for us, and we believe we can expand on its strong trends over time to build even greater value. Burt’s Bees has a highly effective strategy and plan, strong trade practices and organizational capabilities, and a robust culture and esprit de corps that we want to leverage and protect. We strongly believe Clorox’s deep capabilities to drive demand creation through consumer communication and value-creating customer capabilities, coupled with Burt’s Bees’ strong heritage of innovation to delight consumers, create a right to win. We’re delighted Burt’s Bees president and CEO, John Replogle, will continue to lead the company, which will continue to be based in North Carolina.”
“I’m delighted we’re entering into this partnership with Clorox and that I will be part of this exciting next step for Burt’s Bees,” said Replogle. “The Clorox Company and Burt’s Bees have complementary values, visions and strengths. Together, I believe Clorox and Burt’s Bees can help this business realize its full potential.”
“Burt’s Bees’ mission ‘we make people's lives better every day — naturally’ is a terrific complement to Clorox’s mission ‘we make everyday life better, every day,’” Springer said. “Burt’s Bees’ values align strongly with Clorox’s and provide a solid foundation for working together and creating synergies between our management teams.”
Terms of Deal and Financial Impact
Under the terms of the agreement, Clorox will acquire 100 percent of Burt’s Bees from its stockholders in a transaction that is structured as a merger. The company is acquiring Burt’s Bees for $925 million net of an additional $25 million payment for anticipated tax benefits. Clorox will fund the all-cash transaction through a combination of cash and short-term borrowings. The transaction, which is expected to close by the end of this calendar year, is subject to regulatory approval.
Commenting on the transaction, Clorox senior vice president and CFO Dan Heinrich said, “Burt’s Bees is poised to capitalize on expanded distribution within the U.S. and other countries in which the Burt’s Bees brand is currently marketed. The business is enjoying strong distribution trends. We believe we can add value and expand these trends over time through our strong customer capabilities, while maintaining Burt’s Bees’ higher margins. We see potential for expanding the brand into adjacencies, and we believe international expansion may offer significant upside potential beyond our valuation.”
