In an effort to further expand market share and product portfolio, Clorox Corporation (CLX”>CLX) has recently acquired Aplicare Inc. and HealthLink. These two companies are providers of infection control products in the healthcare industry.
The company spent in the range of $80 million to $90 million toward both the acquisitions while funding the deal with cash and commercial borrowings. Combined sales of both the companies are more than Clorox’s 1% annual sales. According to Clorox, the acquisition will have a marginal negative impact on the company’s 2012 profit, but will have not any impact on its dividend and share repurchase plan.
The acquisitions mark another important step for Clorox toward enhancing the health care product portfolio of its ‘Away From Home’ business. The company sees ample growth potential in the use of infection control products.
Clorox is constantly looking for acquisition and alliance opportunities to increase its market share and product portfolio. Moreover, infection control business in the United States is about $2.5 billion and in the next five year is expected to reach $3 billion, according to a report released by Freedonia Group.
Aplicare Acquisition
Based in Meriden, CT, Aplicare develops and manufactures a wide range of products, which are used in preventing skin infections during injections or surgery. Hospitals and companies making kits for health care facilities are the main buyers for Aplicare products.
Aplicare’s capabilities in manufacturing FDA approved products will facilitate Clorox in entering a new distribution channel of providing products to the makers of surgical equipments.
HealthLink Acquisition
Based in Jacksonville, Florida, HealthLink manufactures antimicrobial hand soap and other products used by individual physicians and doctors and other healthcare facilities. The acquisition will facilitate Clorox in enhancing its infection preventing product portfolio and developing relationship with the major health care product distributors across the United States.
In fiscal 2010, Clorox acquired Caltech Industries, one of the major providers of disinfectants in the healthcare industry. With this acquisition, Clorox became one of the primary providers of bleach disinfectants to more than 2,500 acute care facilities across the United States. The acquisition has not only strengthened the company’s product offerings, but also its expertise, R&D and sales capabilities.
Wrapping Up
We believe that the company’s effort of enhancing its product portfolio through acquisitions coupled with intensive investments in information technology and R&D facilities will provide platforms for growth while boosting productivity, product innovation and cost savings.
Clorox Corporation, which competes with companies like Colgate-Palmolive Company (CL) and Procter and Gamble Company (PG), currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock. We have a long-term Neutral recommendation on the stock.
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