GRAND RAPIDS — Executives at Ranir Global Holdings LLC put a plan in place four years ago to grow the company and prepare for investors’ eventual exit.
By 2018, as the world’s largest producer of private-label store-brand oral care products grew sales and earnings at double-digit rates, management started exploring various options, including the potential for an IPO.
Then just before the 2018 holiday season, Ranir President and CEO Rich Sorota met with Murray Kessler, who two months earlier had become president and CEO of Perrigo Co. plc and was working on a plan to transform the company.
The two chief executives shared a similar vision for their respective companies. The strategy that Kessler was formulating to transform Perrigo into a consumer company that brings “quality, affordable self-care products” to market matched Ranir’s mission to “deliver millions of healthy, affordable smiles.”
Their first conversation ultimately led to the $750 million cash deal announced this month in which Perrigo will acquire the Grand Rapids-based Ranir. The companies expect the deal to close by the end of the third quarter.
The sale allows Ranir “to continue the momentum and growth agenda and bring our purpose alive to so many more people across the globe,” Sorota said.
“We’ve been talking about self-care for some time,” he said in an interview with MiBiz. “We understand each other very well and we’re so aligned with each other’s mission and purpose that I believe they’re going to allow us to have even greater impact not only in North America and Europe but across the globe. We’ll also be able to help them in their transformation into a self-care company.”
'A big play'
As it pursues a sweeping $1 billion transformation plan to restore sales and earnings growth, Perrigo gets via the acquisition an immediate and major presence in the global oral care market through the privately-held Ranir, which employs about 650 people, 450 of them in Grand Rapids. Ranir generated $287 million in sales for 2018.
Ranir produces more than 300 products, including manual toothbrushes, power toothbrush heads and handles, whitening strips, dental floss, dentures and travel kits sold in more than 50 countries.
The two companies sell to many of the same major national retailers. Ranir’s top 20 customers have “strong relationships” with Perrigo, Sorota said.
“Us and Perrigo creates more scale and impact with our retail partners,” said Sorota, who expects Ranir to continue double-digit sales growth under Perrigo’s ownership.
“What we’re doing is working. We have our momentum,” he said. “We know what we’re good at and we’re going to continue to stay focused, so I would say expect more of the same.”
In Ranir, Perrigo (Nasdaq: PRGO) gets a company that’s already well down the self-care pathway that Kessler outlined earlier this month for investors. The similarity in strategies made the acquisition attractive, Kessler said.
Kessler called Ranir “a spectacularly aligned company” with Perrigo. He found in Sorota a fellow chief executive who is “so aligned with where I want to go in this company.”
“There is self-care language all through this company, and they get it,” Kessler told investors in a presentation on Perrigo’s transformation plan. “And he’s a year or two ahead from where we are right now.”
Ranir — which averaged compound annual growth rates of 15 percent for sales and 22 percent in EBITDA from 2002 to 2019 — allows Perrigo to show “real and meaningful growth,” Kessler said. The deal for Ranir also adds to earnings as Perrigo transforms and returns to growth, he added.
“It’s a big play for the next couple years and impact,” Kessler said.
Ranir will become part of Perrigo’s North American business unit. Sorota will run the oral care business and contribute to Perrigo’s transformation.
Founded in 1979, Ranir sold in 2008 for $100 million to a group of investors in partnership with Camden Partners Holdings LLC, a Baltimore, Md.-based private equity firm.
As Ranir grew steadily over the years, the investors began preparing for an exit with a new growth plan put in place in 2015 to position the company to “where we thought we would have a number of options at our disposal,” said Chris Capps, the co-founder and CEO of KGC Capital LLC, a Chicago investment firm that’s been Ranir’s largest investor.
Capps invested in Ranir with his father-in-law, the late Dick Kiphart, who ran investment banking for William Blair & Co. LLC in Chicago and co-founded and served as chairman of KGC Capital. Kiphart also was a limited partner in funds at Camden Partners Holdings, said David Warnock, a Grand Rapids native who’s a co-founder and partner at the private equity firm.
Under their ownership, Ranir grew EBITDA by “four-plus times,” Warnock said. The sale to Perrigo for what he described as a “really fair price for us” would generate a return on investment that’s “well over 10 times our money,” he said.
“The return was among the highest returns of any investment in our firm’s history,” said Warnock, who currently serves as board chairman at Ranir.
“It was well above what one would expect in the private equity world,” he said. “Most importantly, we’re putting Ranir in the hands of a company that’s going to do really good things for the people who work there.”
Camden Partners Holdings, founded in 1995, holds 209 portfolio companies and has about $800 million in assets under management across a variety of private equity funds. The firm’s 2008 investment in Ranir also was a personal one for Warnock. The company was founded by his parents’ dentist, Dr. William Najar.
“For me, it was very special,” Warnock said.
Last year, Ranir began working with William Blair & Co. to examine options for its next step. That included the consideration for an IPO, an option that investors and management dropped when the opportunity arose to become part of Perrigo.
“We looked at it, but we figured that this option is probably going to be a better option in the long term, so that’s why we took it,” Capps said. “We just felt that given the state of the business and the state of the markets, this was just a more attractive option for everyone.”
The transaction took root when Jeff Needham, executive vice president and president of Perrigo’s Consumer Healthcare Americas division, introduced Sorota to Kessler and the two got together in late 2018. Sorota and Needham had met a few years earlier and kept in touch.
The connection came as Ranir “was working toward a very disciplined approach” to explore options for an exit by investors, “and we let Perrigo know that,” Sorota said.
“And what often happens is they said, ‘We really love this business and we’re going to try to intervene and pre-empt your process.’ And that’s basically what they did,” Sorota said. “Rarely do you have companies so aligned that can really help each other.”
In selling to Perrigo, Ranir gets a new owner that can help with business systems and data and analytics, Sorota said.
Perrigo, in its transformation plan to a self-care company, also intends to put a renewed focus on M&A, an area where Ranir expects to remain active, Sorota said.
“We’re going to continue to do M&A work to grow this business. That’s an area they have a lot of resources in and I’m confident that when we find an appropriate business that makes sense, we’ll have Perrigo’s support and we’ll be able to drive and make that happen,” he said.
Morgan, Lewis and Bockius LLP serves as Perrigo’s legal counsel on the transaction. William Blair & Co. is the financial adviser for Ranir, which is represented by Kirkland & Ellis LLP.