May 10, 2019
The dream of many entrepreneurs is to launch a great idea—and then get bought out for millions of dollars. That’s just what happened to Andy Katz-Mayfield and Jeff Raider, who founded New York City-based Harry’s in 2013 because “they were tired of overpaying for overdesigned razors, and of standing around waiting for the person in the drugstore to unlock the cases so they could actually buy them.”
Now, they offer a starter set—a weighted rubberized handle, a five-blade razor cartridge, foaming shave gel, and a travel blade cover—for just $8. Customers can choose to continue buying with a subscription service that will send customized refills every two, three, or five months.
Not only have Katz-Mayfield and Raider disrupted the entire shaving industry—until that time, dominated by just two brands (Gillette and Schick)—but now, they’re joining forces with one of them, The New York Times reports.
Edgewell Personal Care—the company that owns the Schick and Wilkinson razor brands (as well as Hawaiian Tropic)—announced on May 9 that it plans to buy Harry’s for about $1.37 billion in stock and cash. And the founders, Katz-Mayfield and Raider, will stay on to run Edgewell’s operations in the United States.
It is the one of the largest recent examples an established business buying a younger, nimbler competitor born of the Internet and predicated on reaching consumers in new ways, the Times reports. That has included deals like Unilever buying Dollar Shave Club, the other shaving start-up sensation, for $1 billion three years ago; as well as Walmart acquiring the online men’s wear purveyor Bonobos for about $310 million.
In the men’s shaving market, the combined Edgewell and Harry’s will remain a distant second to Procter & Gamble’s Gillette brand, which commanded 47.3% of the American market last year, according to data from Euromonitor. Edgewell’s top brands held about 13.6% of the market, while Harry’s had about 2.6 percent.
But executives from Edgewell and Harry’s said in an interview with The New York Times that they saw a chance to form a big, new consumer products company infused with both global reach and new ways of marketing to customers.
Talks between the two companies began in earnest shortly after Little was appointed to his post in March, the executives said. The Harry’s management team had considered alternatives, like an initial public offering, but combining with an established brand ultimately made the most sense.
“This got us where we wanted to go more quickly than some alternative route,” Katz-Mayfield said.
Under the terms of the deal, which was approved by both boards on May 8, 79% of Edgewell’s offer—just over $1 billion—would be in cash. The remainder would be in stock, giving Harry’s investors a roughly 11% stake in the combined company.
Katz-Mayfield and Raider will become co-presidents of Edgewell’s American operations, giving them a bigger perch and more brands to oversee and overhaul. Little will remain chief executive of the combined business.
The deal is expected to close by March 31, 2020.
Research contact: @harry’s