Dive Brief:

• Edgewell Personal Care Company, which runs shaving brands Schick, Wilkinson Sword, Edge, Personna and Skintimate, is adding startup Harry's to that portfolio, the company announced on Thursday. Edgewell will combine with Harry's in a cash and stock transaction that values Harry's at $1.37 billion, according to an Edgewell press release. About 79% of that will be paid in cash and 21% in Edgewell common stock, and in the end Harry's shareholders will own about 11% of Edgewell.

• When the deal closes, Harry's co-Founders and co-CEOs Andy Katz-Mayfield and Jeff Raider will join Edgewell's executive team as co-presidents of U.S. operations, the company said. The combined company, however, will be led by Edgewell executives, including President and CEO Rod Little, Chief Operating Officer Colin Hutchison, who also leads the international division, and CFO Dan Sullivan, among others.

• The transaction has been approved by both boards of directors and is expected to close by the end of the first quarter of calendar 2020, subject to customary closing and regulatory conditions, the company said.

Dive Insight:

Dollar Shave Club, founded two years before Harry's, was the startup that initiated disruption of a men's shaving market that was relying on retailers to sell their razors on the cheap and their blades at a high premium. Unilever three years ago grabbed Dollar Shave, and its talent and e-commerce chops for $1 billion.

Now it's Harry's turn to give over its expertise and operations to a legacy company. Edgewell, which traces its roots to 1875 with the founding of Personna, now operates in more than 50 markets globally, including the U.S., Canada, Mexico, Germany, Japan and Australia. The conglomerate emerged during a 2015 spinoff involving Energizer Holdings, according to the company's website.

The tie-up promises to deliver efficiencies and growth opportunities to Harry's, the companies said, including Edgewell's retailer relationships, research and development, supply chain, manufacturing, global scale and distribution. Edgewell, meanwhile, "will incorporate Harry's technology and web platform, data and analytics, digital and performance marketing, shopper experience and engagement capabilities to drive growth," according to the release. The companies expect to generate about $20 million of EBITDA in annual cost savings by 2023, driven by international expansion, product and brand enhancement and new brand and category launches. 

Perhaps most important, though, is that Edgewell, in Harry's, will garner a customer relationship that is virtually impossible to achieve and nurture when selling through traditional retailers, according to Matt Sargent, SVP of retail at consulting firm Magid. "If you look at traditional brands — because of their scale and the way they've set themselves up — they've been insulated from the consumer. They've developed an efficient model and really a profitable model, but the problem with that, and what direct-to-consumers have, is that whole ecosystem that allows them to know how the consumer interacts with a brand."

While the nearly $1.4 billion price tag may seem steep, and eclipses even the Dollar Shave purchase, it's well worth it considering that the old way of distribution and branding consumer products is on its way out, according to Sargent. That's true even though the level of interaction between direct-to-consumer companies and their customers destroys well established efficiencies. "Yes, this does make the traditional model inefficient, but here's the problem — the traditional model is disintegrating and is not going to be here much longer," he said.