Analyst Breaks Down Colgate's Largest Acquisition Since 1995

Colgate-Palmolive Company CL acquired Laboratories Filorga in a move which will support growth amid global challenges, according to Bank of America.

The Analyst

Bank of America's Olivia Tong maintains a Buy rating on Colgate-Palmolive with a $80 price target.

The Thesis

Colgate's $1.69 billion acquisition of Laboratories Filorga, a high-end anti-aging skin care brand, represents the conglomerate's largest acquisition since buying Kolynos in 1995, Tong wrote in a note. Estimates place Filorga's annual sales near $250 million, or 2% of Colgate's current sales base.

The addition of Filorga could bring 50 basis points to Colgate's annual sales growth if the acquired brand grows at a 30% clip, the analyst wrote. As such, the acquisition could be seen as a move to support Colgate's overall growth as the premium skincare market is among the fastest growing categories in the entire Staples sector. Under Colgate's umbrella, the brand faces notable geographic expansion.

The acquisition could be seen as a sign of Colgate's willingness to invest in inorganic initiatives to better position itself to the changing consumer environment, the analyst wrote.

Finally, the price tag on the acquisition implies a "rich" mid-high single-digit multiple on sales and more than 20 times on EBITDA, the analyst wrote.

Price Action

Shares of Colgate-Palmolive were trading higher by 0.23% at $74.06 late Friday.

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