Church & Dwight Co., Inc. to Acquire Orajel and Other OTC Brands for $380 Million Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning, ladies and gentlemen, and welcome to Church & Dwight's conference call.

Before we begin, I have been asked to remind you that in this conference call the Company's management may make forward-looking statements regarding, among other things, the Company's financial objectives and forecasts. These statements are subject to risks and uncertainties, and other factors that are described in detail in the Company's SEC filings.

I would now like to introduce your host for today's call, Mr. Jim Craigie, Chairman and Chief Executive Officer of Church & Dwight. Please go ahead, sir.

JIM CRAIGIE, CHAIRMAN AND CEO, CHURCH & DWIGHT CO., INC.: Thank you. I appreciate everyone taking the time on this Tuesday morning, given the short notice. We will try to keep our comments brief and then open up the call to you for any questions.

Earlier this morning, we announced that Church & Dwight has entered into an agreement to purchase the assets of the Del Pharmaceuticals business, which consists largely of the Orajel brand, for $380 million in cash, from Coty. I would like to add some color to the reasons stated in the press release this morning on why we are excited about this business and its products. I'll then turn the call over to Matt Farrell, our Chief Financial Officer, who will discuss the financial aspects of the acquisition.

Let me start out by saying that Orajel is a strong number-one brand in the oral analgesic market, with significant market share in the oral pain treatment segment for both adults and children, and the children's toothache segment. Orajel has strong brand heritage that goes back over 40 years that stands for oral pain relief and oral hygiene. This is a great brand in a growing category that fits our core acquisition criteria of number-one and number-two brands that are accretive to the Company in terms of margins, earnings per share and free cash flow.

The brands have strong consumption results and the categories are growing at healthy rates. This business grows at a rate which is higher than our corporate target of 3 to 4%, and has significantly higher gross margins than the Company average. In addition to the Orajel line of products, this business also has six OTC brands that represent roughly 20% of the net sales and will complement our existing small OTC business.

We feel the Orajel brand fits well into our existing premium oral care line of products, and it should be a strong addition to our existing Arm & Hammer Toothpaste and SpinBrush franchises. This will provide Church & Dwight with additional scale in a core category with a growing brand and dependable categories.

I would now like to turn the call over to Matt Farrell to discuss the financial aspects of the acquisition.

MATT FARRELL, CFO, CHURCH & DWIGHT CO., INC.: Thank you, Jim, and good morning, everybody. I have some comments on this transaction -- in particular, valuation, synergies and leverage. I will start with valuation.

Our yardstick for measuring acquisitions is purchase price as compared to synergized EBITDA as a measure of value. The purchase price for this acquisition is $380 million. In terms of the EBITDA, the 2007 EBITDA for this business was approximately $28 million. You see in the press release that we estimate synergies of over $10 million, which brings the synergized EBITDA to roughly $38 million. Therefore, the purchase price multiple …