Clorox to Buy Burt's Bees for $925M; Tops Earnings Estimates

Consumer products manufacturer The Clorox Company announced Wednesday it was buying natural care company Burt's Bees for $925 million. The deal to acquire 100% equity in the privately held Burt's will be funded through a combination of cash and short-term debt. According to Clorox CEO Donald R. Knauss, "This acquisition allows us to enter a growing market that's consistent with consumer megatrends... we're entering into a new strategic phase for our company, enabling us to expand further into the natural/sustainable business platform." The press release claims, "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." Burt's is estimated to be on pace for $170 million in net sales in 2007 and will add two points of top-line growth to Clorox in fiscal years 2008 and 2009. The merger isn't expected to be accretive to Clorox's earnings until 2009; it will reduce FY2008 EPS by $0.10 to $0.15. The deal is expected to close around the end of the current calendar year, subject to regulatory approval.

Clorox also reported earnings for its quarter ended 9/30/07 (F1Q08) Wednesday, reporting slightly lower net income of $111 million, versus $112 million a year ago. However, due to a reduction in shares outstanding, EPS grew to $0.76, versus $0.73 per share a year ago. Sales rose $80 million Y/Y to $1.24. Consensus analyst estimates were for EPS of $0.62 on sales of $1.21 billion. Growth was strong in Clorox's higher margin businesses, including food products and Brita water-filtration products. The company expects FY2008 total growth of 4% to 5%. Clorox's shares were untraded in pre-market action; they are lower by 5% YTD.

Sources: M&A press release, Earnings press release, MarketWatch I, II, Reuters
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