“We are disappointed by the FTC’s decision and continue to disagree with its position,” said Edgewell CEO Rod Little. He said the company decided not to fight the FTC in court given the uncertain outcome and potential resulting distraction. There is no cash breakup fee from the scuttled deal, he said.
Edgewell said Harry’s intends to pursue litigation against its former merger partner. Edgewell said it believes that such litigation has no merit.
Acccording to industry observers, Edgewell’s move hands a notable victory to the FTC, which spent months considering whether the proposed transaction would lead to higher consumer prices. The commission, made up of three Republicans and two Democrats, reached the unanimous conclusion that the tie-up would eliminate one of the most important competitive forces in a shaving industry that has long been controlled by two entrenched companies.
“We continue to be perplexed by the FTC’s process and disregard of the facts,” Harry’s said. The company said it was “disappointed by the decision by Edgewell’s board not to see this process to its conclusion.” Harry’s started in 2013 by selling its razors online but has moved into retail stores like Target Corp. and Walmart Inc.
The FTC didn’t immediately respond to a request for comment. The commission has sunk several would-be mergers in recent weeks, including deals that would have combined cereal makers and biotech companies. As in the razors case, companies in those deals walked away instead of trying to beat the commission in front of a judge.
In addition to its shaving business, Edgewell’s brands include Banana Boat sunscreens and Playtex tampons. Still, the razor business accounted for more than half of its $2.1 billion of net sales in the fiscal year ended Sept. 30. The company was created in 2015 after the Energizer battery business was spun off into a separate public company.
Little said Edgewell would continue to pursue its own direct-to-consumer efforts but it will take longer to build than it would by buying Harry’s. He also said Edgewell will continue to look for smaller brands it can acquire but isn’t looking for another big deal like Harry’s.
“We’re out of the market for big transformational things. This was a unique opportunity for us here. But bolt-on M&A is absolutely part of the plan going forward,” Mr. Little said on a conference call. In December the company sold its infant and pet-care business for $123 million in cash.
Edgewell will look for a new executive to run its North America operations, Mr. Little said, since Harry’s co-founders were expected to take over Edgewell’s US operations after the deal.
On Monday, Edgewell said sales for its first quarter fell to $454 million from $457.1 million a year earlier. The company had a profit of $22.4 million compared with a loss of $400,000 a year earlier.
Sales in the company’s razor business, excluding acquisitions or divestitures, fell 3% from a year ago, dragged down by competition in North America and market share losses. Executives said they expect similar challenges during 2020.