Edgewell’s plans of acquiring Harry’s for $1.37 billion under threat as FTC raises competition concern

Edgewell
had previously announced plans of acquiring Harry’s (shaving startup) for $1.37
billion. Owing to the competition concerns, however, the Federal Trade
Commission stated on Monday that it intends to block the acquisition deal.

According
to the regulatory agency, it is crucial for startups like Harry’s to keep in
business as it helps to create a check on the giants of the industry like
Edgewell or Procter & Gamble.

Merging
with Edgewell will improve Harry’s access to a broader platform that can help
it expand the business further than its current nine factories. Edgewell, on
the other hand, will relish Harry’s subscription base.

FTC’s
Decision Came As A Surprise For Many Industry Insiders

In
the past few years, Harry’s has come out as one of the very few direct to
consumer brands that started their journeys online and later made a debut in
the traditional retail. The online business enables the company to keep its
prices affordable without having to opt for a middle man, all the while
offering broader customers insights. In an attempt to expand further, however,
Harry’s had stepped into traditional retail in the past years that currently
contribute to 50% of its sales.

The
FTC’s announcement came as a surprise for many of the industry insiders as
the startup’s grasp over the razor market is only modest at best. As per
Euromonitor, Harry’s had a 2.6% share in the United States’ razor market in 2018.
Furthermore, multiple precedents for such deals are also there including
P&G’s acquisition of Billie (women’s shaving brand) and Unilever’s acquisition
of Dollar Shave Club for $1 billion in 2016.

FTC
has declared June 30^th as the date on which an administrative trial
is expected to begin. Harry’s and Edgewell, however, are yet to reveal if they
are up to fight the trial or would the two companies rather drop the plan of
the acquisition altogether.

Edgewell
Has Lost 10% In The Stock Market In 2020 So Far

Edgewell
gained around 8% on Monday that saw its market capitalization hitting the $1.4
billion mark. The company’s overall performance in 2020, however, hasn’t been impressive
with around 10% decline in January.

In
an event that the deal proceeds, shareholders of Harry’s
will receive an 11% stake in the merged company while the rest of it will
be paid in cash.

With
a market cap of $307 billion, P&G shares traded mostly flat on Monday. In 2020
so far, P&G has lost under 1% in the stock market.