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Orange Glo International, Inc.

Background:
Orange Glo International, Inc. ("OGI" or the "Company"), headquartered in Greenwood Village, CO, was founded by Max and Elaine Appel in 1987 on the premise that its products should "delight consumers with innovative and powerful new ways to clean". Best known for its OxiClean brand, a premium-priced leader in the rapidly growing pre-wash additives segment and the #2 brand in the $1.0 billion (at retail) laundry additives category, OGI's portfolio also included Kaboom bathroom cleaners and Orange Glo household cleaning products. OGI's sales in the fiscal year ended January 1, 2006 were almost $200 million, with two-thirds of those sales from OxiClean. In the same period, OGI reported operating profit before charges of $17 million.

Our industry enjoys a unique set of competitive dynamics. We sought an advisor who understood our industry's trends, key players and forces of change, as well as strategies to maximize value for our shareholders. By focusing on the consumer industry, Sawaya Segalas has been able to develop significant expertise and relationships in our industry that allow them to quickly assess a company's core value and the ways to best realize that value. The result was an efficient process for both us and our potential transaction partners. Clearly, Fuad and his team believe in long-term relationships. Sawaya Segalas went out of its way to get to know us significantly before we ever considered a transaction. Over several years, they also went out of their way to provide us with advice and introductions that helped us to strengthen our own performance and value.
David Appel
Chairman, Orange Glo International, Inc.
Sawaya Segalas' hands-on approach enabled us to conduct a highly successful process while continuing to excel in managing day-to-day operations. Their advice, friendship and willingness to go the extra mile were critical in guiding us through this intense and competitive process which included management presentations in several different locations, offsite diligence sessions in Colorado and almost daily conference calls. Sawaya Segalas handled the transaction process and negotiations perfectly.
Joel Appel
President, Orange Glo International, Inc.

Objective:
Sawaya Segalas had maintained a relationship with the Company and family for a number of years, offering formal and informal counsel on strategic matters as the business grew. The relationship had started when OGI had sales of about $10 million. By the time Sawaya Segalas was retained in 2005, the Appel family had reached a consensus that the business model had stabilized, was far less reliant on the direct-to-consumer channel, and had convincingly withstood competitive entries into their category. As such, the Appel family felt that the full potential for the brands would best be realized by one of the global laundry/household products competitors who could both efficiently integrate the operations and expand certain of the brands internationally.
From an M&A and structuring standpoint, the Appel family had three main objectives: First, recognizing the drain on a company exposed to a protracted sale process, the family was looking for a process that would be targeted, quick and efficient. Second, the family showed no appetite in embarking on a break-up of the Company and its brand portfolio -- despite the standout growth and disproportionate profitability of OxiClean. Third, the family had no interest in maintaining an ongoing ownership stake or managerial role.

Process:
In light of the stated objectives of the family, Sawaya Segalas recommended limiting the solicitation process to certain large strategic buyers. In light of the valuation expectations, no financial buyers were targeted. This approach also went a long way to maintaining strict confidentiality, expediting the process, and minimizing the disruption to the business that was growing at double-digit rates. On the basis of an introductory phone call and drawing on Sawaya Segalas' deep industry relationships, six global strategic buyers accepted the invitation to attend a tailored management presentation on the OGI business. No confidential information memorandum was distributed nor were indications of interest sought ahead of the meeting. This decision provided the family and management team the forum to portray the brand as it stood in 2006, and not be burdened by its historical sales, marketing and channel strategies.

Outcome:
  • After extensive due diligence by five of the six invited parties, a number of final offers were received on the planned date. In less than 10 days following the submission of the final offers, Sawaya Segalas with the assistance of Kirkland & Ellis, Company's counsel, were able to orchestrate a tightly controlled final round auction between two strategic buyers.
  • In that period of time, prices and terms were improved by both parties and resulted in Church & Dwight Co., Inc. ("CHD"), agreeing to purchase OGI at a transaction value of $325 million. The deal sailed through the Federal Trade Commission and closed 24 days later.
  • The transaction was structured as an asset purchase resulting in a cash benefit to the buyer resulting from tax depreciation with a net present value of over $60 million.
  • CHD manufactures and markets a wide range of personal care, household and specialty products under the Arm & Hammer brand name and other well-known trademarks. At the time of the announcement, CHD announced cost synergies of approximately $20 million associated with combining logistics and administrative functions, among others, representing about 10% of the sales of OGI.
  • The transaction value represented a sales multiple of 1.6x and a fully-synergized EBITDA multiple of 8.9x, which at the time were high watermarks in the household products segment. Equally importantly for a family business, under CHD's ownership, the brands would perpetuate their heritage of innovation and growth.
  • According to CHD, the acquisition was expected to have a slightly negative effect on 2006 earnings per share due primarily to integration costs, and be moderately accretive in 2007 and contribute strongly to earnings in 2008.
  • The capital markets responded favorably to CHD's acquisition announcement; in the 30 days following the deal, CHD stock rose 6.1% vs. 4.8% for the S&P 500 overall.
Orange Glo
Client
Orange Glo
Brand
Kaboom
OxiClean
Orange Glo
Counterparty
Church & Dwight Co., Inc.
Segment
Household Products & DIY
Transaction
Sale of Company
Transaction Value
$325 million
Closing Date
August 7, 2006
Role
Exclusive Financial Advisor
 
 
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