Consumer goods business PZ Cussons (PZC) has acquired Childs Farm, the UK’s largest baby and child personal care brand. The £36.8 million cash deal comes as the FTSE 250 firm looks to accelerate growth in its core product categories.
Shore Capital said this was ‘a welcome return to the acquisition trail’ for Manchester-based PZ Cussons, adding that its ‘journey from turnaround to transformation has commenced.’
Shares in PZ Cussons rose 0.6% to 192p, valuing the business at a little less than £830 million.
Childs Farm’s founder Joanna Jensen (pictured below) will continue to champion the brand at home and abroad and has invested into the PZ Cussons subsidiary that completed the acquisition such that PZ Cussons now holds a 92% interest in Childs Farm for a total consideration of £36.8 million.
As part of the deal, there is ‘an agreed path to full ownership’ for PZ Cussons by the end of May 2025.
PZ Cussons stressed the consideration will be fully funded by cash from existing facilities, reflecting the Manchester-based group’s strong financial position.
ABOUT CHILDS FARM
The maker of Carex hand wash, Morning Fresh washing up liquid and Australia’s biggest baby food brand Rafferty’s Garden insisted Childs Farm will complement its strategic focus on the baby and hygiene categories and join PZ Cussons’ stable of ‘Must Win’ brands.
The UK’s market-leading baby and child personal care brand, one anchored around natural ingredients and sensitive skin, Childs Farm’s bath and shower, skincare and haircare products are sold in many UK retailers and the company generates roughly 20% of its revenues from e-commerce.
It has grown rapidly since its 2011 launch and according to PZ Cussons, boasts ‘highly attractive gross margins’, though the business made a £900,000 pre-tax loss on £17.4 million of revenue in 2020 and the deal won’t enhance PZ Cussons’ earnings until the year to May 2024.
‘The foundations of our new strategy “Building Brands for life, Today and for future generations” are firmly in place and are delivering results,’ insisted PZ Cussons’ CEO Jonathan Myers.
‘As we transition from turnaround to transformation, we are delighted to take this important step to accelerate growth in our core categories and priority markets.’
THE ANALYSTS’ VIEW
With a ‘buy’ rating and 340p price target for PZ Cussons, Investec commented: ‘This asset looks a fantastic fit for the group, as it strengthens and diversifies the Baby business within the group’s focus areas of Hygiene, Baby and Beauty.
‘The geographic footprint is also highly complementary with the brand having a presence across two of PZ Cussons’ priority markets (the UK and Australia).’
Shore Capital, which has a ‘hold’ rating on PZ Cussons, sees the acquisition as ‘a clear step forward by PZC out of a material fixing mode into something more progressive, focused upon the building of the brand portfolio, developing brands and building their reach and so bolstering and expanding the proprietary value of the group in a contiguous manner.
‘It is for these reasons that we particularly welcome this acquisition, noting its modest bear-term dilution to earnings.’
