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Energizer Bunny Navigates Razor’s Edge In Bid For American Safety Razor Company

Posted  October 8, 2010

Despite looming antitrust hurdles, Energizer Holdings Inc. is one step closer to acquiring a bankrupt shaving products competitor after the U.S. Bankruptcy Court for the District of Delaware granted Energizer permission to bid on American Safety Razor Company.

American Safety filed for Chapter 11 bankruptcy protection on July 28, citing increased competition and the loss of customers, namely Wal-Mart Stores Inc., as the primary reason for its recent difficulties.

Judge Mary F. Walrath determined that the prior auction, won by American Safety’s first-lien lenders with a bid to forgive a claim to $244 million, too narrowly restricted the field of potential bidders.  Upon recognition of Energizer’s earlier $301 million cash bid, the court determined that a new auction must commence in order to maximize the amount paid by the victor.  Judge Walrath indicated that Energizer must be given sufficient time to engage in due diligence prior to the next auction.

American Safety Razor previously determined that Energizer’s cash bid was inadequate, particularly given the level of antitrust scrutiny that may follow.  Given the court’s current posture, the attractiveness of inviting Energizer to the auction table apparently outweighed the risk of future antitrust issues should Energizer prevail.

Energizer, the maker of Schick razors and other shaving products, currently holds a strong position in the razor market, second only to Proctor & Gamble’s powerhouse, Gillette.  American Safety Razor is one of the leading producers of razor blades and personal care products, with sales to supermarkets and other merchants under both retailer names and American Safety’s brand names.  The acquisition of New Jersey-based American Safety would allow Energizer to increase its market share substantially through strategic expansion and broaden its opportunity to reach consumers.

Regardless of whether Energizer is ultimately successful in the next auction, the ripples from this decision may be seen far from Delaware.  Given the recent financial woes of many companies, surviving competitors with the means to expand may have a stronger claim to be invited to the auction block.  Moreover, the behavior of management of a bankrupt company may be scrutinized more closely to ensure that all necessary and appropriate efforts are made to accommodate bidders, even competitors.

It is unclear who will win the next auction and what level of antitrust scrutiny will follow should Energizer succeed, but if Energizer is successful its brand presence and market share will keep growing and growing and growing ….

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