A deal to combine two of America’s biggest shaving companies collapsed in acrimony on Monday after opposition from antitrust officials prompted Edgewell Personal Care to abandon its pursuit of upstart rival Harry’s.
Edgewell, the maker of Schick razors, said on Monday that regulators’ determination to block the $1.37bn acquisition in court meant it was no longer worth pursuing, a decision that led Harry’s to threaten legal action of its own against its erstwhile suitor.
The scrapping of the deal comes a week after the Federal Trade Commission filed a lawsuit to prevent the tie-up, arguing that the proposed combination would “eliminate one of the most important competitive forces” in the shaving business.
Regulators argued that for many years Edgewell — which also makes Wilkinson Sword — enjoyed a “comfortable duopoly” in the shaving market along with Gillette owner Procter & Gamble.
Harry’s, which was founded in 2013 and sells its shaving products through an online subscription service as well as in stores, had, along with Dollar Shave Club, forced the incumbents to lower their prices.
Rod Little, Edgewell chief executive, told Wall Street analysts on Monday that while the company disagreed with the FTC it did not wish to fight its case in court.
He cited the “uncertainty about the potential outcome”, as well as the “resources, time and resulting distraction to our business a continuing legal battle with the FTC would entail”.
In contrast, Harry’s said it was “perplexed by the FTC’s process and disregard of the facts” and believed the companies would have prevailed in litigation.
Harry’s would not comment on the nature of its case against Edgewell but said in a statement that it was “disappointed by the decision by Edgewell’s board not to see this process to its conclusion”. Edgewell said Harry’s had informed it that it intended to pursue litigation, adding it had “no merit”.
Shares in Edgewell jumped 25 per cent after it announced its decision to abandon the deal alongside its quarterly earnings on Monday.
Under the proposed terms, about 79 per cent of the consideration would have been paid in cash and the remainder would have comprised Edgewell stock.
Andy Katz-Mayfield and Jeff Raider, who met as interns at private equity group Bain two decades ago and started Harry’s, were to join Edgewell’s executive team as co-presidents of its US operations.
The two companies had planned to combine Harry’s experience in building brands and direct-to-consumer marketing with Edgewell’s intellectual property and global scale.
However, the FTC said that Edgewell was trying to “short-circuit competition” and that the deal threatened to cause “serious harm” to consumers.
The collapse of the deal is a win for the FTC, whose five commissioners voted unanimously to take legal action to stop it. Daniel Francis, deputy director of the FTC’s Bureau of Competition, said in a statement: “This outcome is good news for consumers across the country.”
Harry’s sells a Flamingo brand for women as well as its eponymous brand for men.