Prestige Announces Agreement to Expand Eye Care Offering with Acquisition of TheraTears

Prestige Consumer Healthcare Inc. announced that it has entered into a definitive agreement to acquire a portfolio of over-the-counter consumer brands from specialty pharmaceutical company Akorn Operating Company LLC (“Akorn”) for $230 million in cash. The agreement is structured as an asset purchase that delivers anticipated tax benefits of ~$30 million and expected annual EBITDA of ~$20 million equating to a transaction valued at less than 10x pro-forma EBITDA. The transaction is estimated to add annual Revenues, Earnings Per Share and Operating Cash Flow of approximately $60 million, $0.10 and $13 million, respectively.

The consumer product portfolio to be acquired from Akorn features the TheraTears eye care brand, which represents approximately 80% of portfolio revenues, as well as four other brands in the VMS and Cough & Cold categories. TheraTears is a doctor-created brand with heritage dating back to the mid-1970s when ophthalmologist Dr. Jeffrey Gilbard began research into treatment and relief of dry eyes. The brand has a strong and loyal user base for its products and participates in the fast-growing OTC “dry eye” segment.

“Prestige has a long and successful history in the eye care space highlighted by the iconic Clear Eyes brand. The acquisition of the proven TheraTears brand will further enhance this leading eye care franchise with additional long-term growth opportunities in the fast-growing ‘dry eye’ segment,” said Ron Lombardi, Chairman and Chief Executive Officer of Prestige Consumer Healthcare.

The TheraTears brand is well positioned with the mild and episodic dry eye consumer with a long track record of steady market share gains and revenue growth above the category. Furthermore, the portfolio complements Prestige’s operational model with outsourced manufacturing and similar distribution characteristics to the Company’s existing business. The brands are expected to be able to leverage existing infrastructure resulting in a timely integration. The Akorn portfolio has a solid financial profile of sales growth and margins consistent to Prestige’s long-term growth targets and financial profile.

“Today’s acquisition announcement reinforces our strategy that acquisitions will remain part of a disciplined capital allocation approach, alongside debt reduction and continued investment in our leading brand portfolio. The acquisition is a match with our criteria that focuses on long-term brand building opportunities, fits with our business model and provides disciplined returns. We anticipate this proven strategy of acquiring, integrating and building brands to grow our portfolio will continue to build shareholder value for the long term,” Mr. Lombardi concluded.

The Company plans to finance the acquisition with a combination of funds from its existing credit facilities and available cash and expects the transaction would add approximately a half point to its leverage calculation at the time of the close. Prestige anticipates the FY22 year-end pro-forma leverage level will be below the FY21 year-end covenant-defined leverage ratio of 4.2x. Upon closing, the transaction is expected to be accretive to earnings per share and cash flow from operations, exclusive of transaction, integration and purchase accounting items. The transaction is expected to close during the fiscal second quarter, subject to customary closing conditions, including clearance under the Hart-Scott Rodino Antitrust Improvements Act of 1976.

Sawaya Partners, LLC is acting as exclusive financial advisor to Prestige in the transaction and Reed Smith LLP as legal counsel.