The (Potential) Deal
The word on the street is long-time family-owned, Akron, Ohio-headquartered hygiene and sanitizer company Purell is looking for a new custodian.
Well, this is pretty much the case anyways, as it might be more technically sound to say that Purell’s parent company, GOJO Industries has reportedly shown a fair amount of interest in putting itself up for sale.
Before getting too deep into the weeds, let’s start off with some of the basics regarding GOJO Industries and Purell and its background.
When one thinks of GOJO Industries, it is more than likely that pretty much nothing comes to mind, other than curiosity regarding what such a company does, however, when one thinks of Purell, they probably feel a lot more familiar with the company that has done a lot in keeping their hands feeling clean.
What had initially started as a husband and wife business endeavor has flourished into a company that reportedly does around $1 billion in annual revenue (GOJO Industries, Purell’s parent company, is a private company, at least, at the time of this writing) and serves any entity from small to large businesses, hospitals, schools, universities, public transportation institutions (i.e., trains, buses), airports, performance venues and essentially any location in which people tend to gather or travel to and from.
Sanitizer soaps and dispensers and a few other related products is really the name of the game for Purell and its steady success, and, obviously, GOJO (again, Purell’s parent) happened to be one of the few companies that largely benefited from the public onset of COVID-19 and the widespread trends of heightened concern regarding hygiene and cleanliness that came and are still thriving as a result of the Pandemic.
Putting this all together and before diving into who some of the reported interested buyers are, we have our own perspective(s) pertaining to some of the companies that might be interested or, at least, should be interested in wholly acquiring arguably the most popular, distinguished hand sanitizer company in the world.
Suitors
For starters, we have actually written about one of the world’s leaders in the uniform rental sector, Cincinnati, Ohio-based Cintas, as while the company primarily engages in the cleaning, transport and rental of uniforms and other worker-related gear and accessories, it also generates revenues through the sale of its own hand soap dispensers and stations, among a few other supplemental products and services that have been proven to be essential for businesses and other entities across the board.
From our vantage point, there are some natural synergies here, as both of these companies are based in Ohio, they are both rather large players in their respective industries (primarily, Cintas in linens and uniform rental and GOJO in the hand sanitizer realm through Purell) and it certainly helps that Cintas is a well capitalized company that could make a deal like this work with little to no issue, excluding, of course, antitrust concerns that could be brought into question by entities such as the Department of Justice (DOJ) and/or the Federal Trade Commission (FTC), among other regulatory agents.
Nevertheless, barring any issues in the anti-competition-sphere, Cintas could, way more likely than not, make this deal work.
Another major company that comes to mind that would likely be a good steward of Purell is water and sanitation specialist, Saint Paul, Minnesota-headquartered, Ecolab.
GOJO Industries and Purell could just be the icing on the cake for a company such as this one, beefing up its total annual revenues and adding some rather lofty intellectual property within its fold with the (hypothetical) acquisition of Purell and GOJO as a whole.
Now, let’s briefly discuss and evaluate some of the other companies that have apparently shown considerable interest in buying out GOJO Industries.
According to recent reports, interested players include privately held, prominent Wisconsin-based household cleaning supply company SC Johnson as well as Ecolab, Stockholm, Sweden-headquartered consumer goods and health company Essity (which is best known for being home to a company by the name of Tork, which is a dominant force in the napkin, paper towel and soap dispenser spaces) along with a potential bidder that hits a bit closer to home, Dallas, Texas-headquartered Kimberly-Clark, which, among other things, is a seller and distributor of hand sanitizing stations, not to mention its brands in the consumer packaged goods (CPG) space, including but certainly not limited to Cottonelle, Huggies and Pull-Ups.
To us, all of these additional, announced potential suitors make sense as they concentrate a fair amount of their operations in the hand soap and sanitation space(s) and are also likely well equipped financially to adequately afford to purchase GOJO Industries.
The problem, however, lies within the discrepancy between the bidder’s and the seller’s asking prices, specifically regarding the actual worth of GOJO Industries and its primary subsidiary, Purell.
No matter how good a deal may look or actually be, like most (if not all) things in the financial world or really, life in general, the price one is willing to pay is a major consideration and factor in any given set of outcomes.
That being said, it seems as though the family behind GOJO Industries today might not be the largest fan of the initial bids from some of the aforementioned companies and, who would’ve thought, thinks the company is worth more than what initial bidders might think it’s worth, however, the reported discrepancy (if there is one) isn’t likely all that insurmountable, as those running GOJO seem to think the company is worth somewhere in the neighborhood of $3 billion whereas its respective bidders might think (upon performing their due diligence on the company) it’s actually worth more like $2 billion.
Evidently, this is certainly a bridgeable gap, especially for a company as well known and valuable as Purell, as many of the aforementioned companies likely see this as a sort of once in a lifetime opportunity.
This is one of the reasons we ultimately think Purell and its parent will be wholly acquired in the not-so-distant future, say, within the next five years, at most, as this isn’t a very large gap to fill, especially for companies that are intent on taking GOJO Industries off the market.
The Best Suitor
First and foremost, it must be understood that this is a very subjective matter and, really, any of the previously listed companies would likely be fine stewards and owners of Purell and everything else within the GOJO Industries entity.
However, it is our opinion that with its emerging scale and grip in the hand sanitizer space, its current financial condition overall and its proven ability to scale out its supplemental lines of business in relatively short spans of time, not to mention its relative geography, uniform rental and sanitizer company Cintas appears to be a fantastic suitor and potential new owner of Purell and GOJO Industries.
At least, if I happened to be at the helm of the company, I would most definitely be intrigued by the opportunity to purchase a steady, reliable, largely recession proof business that has been carefully and seemingly responsibly tended to since its founding in 1988 and furthermore, use it to scale out my operations at a more rapid rate in a relatively new but not foreign business segment.
To me, upon proper internal financial analysis and outside advising and counseling from other analysts and experts along with respectful yet firm pricing and valuation negotiations with GOJO’s executives, this would be a great deal that would further separate ourselves from the competition and also deliver stronger, more diversified yet focused results for current and prospective shareholders.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.