The $1.9 billion deal happens in the shadow of the industry's 800-pound gorilla, Procter & Gamble Co., which is the primary competitor in both companies. Energizer already was up against P&G in two key categories -- batteries and shaving. With the acquisition of Playtex, Energizer will engage P&G more broadly, particularly in tampons and skin care, which make up a combined 72% share of Playtex's $641 million in sales.
But the deal still will bring Energizer's sales to only $3.9 billion, less than a 20th the size of $80 billion-plus behemoth P&G.
Even so, Energizer has fared well since P&G entered the battery and razor businesses with the 2005 acquisition of Gillette. Despite the global launch of Gillette's Fusion men's shaving system, Energizer has maintained its overall share in shaving. And it has gained share in recent years on P&G's Duracell batteries.
Energizer's stock price has more than doubled since P&G announced it would buy Gillette in early 2005, while P&G's stock is up about 15% over the period.
Hard times for Playtex
It's been a different story in recent years for Playtex, whose biggest brand, Playtex tampons, has been losing share to P&G's resurgent Tampax brand in recent years. Playtex also has been battling much bigger rivals such as Kimberly-Clark Corp. and Johnson & Johnson in categories such as baby care and sun care.
But Playtex's sales growth has improved since P&G veteran Neil DeFeo took over as CEO in October 2004.
In a rare occurrence, the stocks of both companies moved up on the news. In midday trading, Energizer shares were up 0.9% to $107.64, and Playtex shares were up 16% to $17.98.
"I think there are a lot of overlap and synergy opportunities," such as co-marketing of Energizer and Playtex products, Energizer CEO Ward Klein said in a conference call, but he didn't elaborate on how the deal would affect marketing for the companies.
Razor innovation draws to close
In a research note, Morgan Stanley analyst Bill Pecoriello said he sees the move as adding a "third leg" to Energizer as prospects for its other two businesses slow. "Our view is that the razor innovation cycle was nearing its end [following the Quattro and Intuition launches in recent years]," he wrote, adding that the battery business also faces issues with rising commodity costs and heightened competition from P&G.
He said Energizer has been cutting advertising and promotion spending to generate "earnings upside" the past several quarters.
WPP Group's Grey Global Group, New York, handles Playtex's tampon brand. WPP's Mediaedge:cia handles media for the Energizer brand, while sibling JWT handles Schick, and Omnicom Group's TBWA/Chiat/Day, Playa Del Rey, Calif., handles Energizer batteries.