The Clorox Company (CLX) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to The Clorox Company Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Ms. Lisah Burhan, Vice President of Investor Relations for The Clorox Company. Ms. Burhan, you may begin your conference.

Thanks, Paul. Good afternoon, and thank you all for joining us on such short notice to discuss our company's announcement earlier today regarding the acquisition of GOJO Industries, the maker of Purell brand. Joining me today on the call are Linda Rendle, Chair and CEO of The Clorox Company; and Luc Bellet, CFO. During today's discussion, we'll make forward-looking statements. These statements are based on management's current expectations but may differ from actual results or outcome. Please also refer to our press release and SEC filings for a discussion of those risks. We'll also reference certain non-GAAP measures, which are reconciled in our materials. Today's press release and accompanying presentation can be found on the Investor Relations section of our website. A replay of the webcast will be available at the same location. With that, I'll turn the call over to Linda.

Thank you. As Lisah mentioned, we are all grateful that you're able to join this afternoon's call. As you saw, we issued a press release announcing we've reached a definitive agreement to acquire GOJO Industries, the makers of the Purell brand, a leader that is synonymous with skin, health and hygiene. Today, I will share more about GOJO, why it is a strategic and financial fit with Clorox and how it advances our IGNITE strategy to create value for shareholders. Luc will then go into details of the financial benefits, and then we will take your questions. Let me first ground us in our core business in Health and Wellness, our largest, fastest-growing and most profitable business segment. Our trusted cleaning and disinfecting brands across retail and B2B deliver superior value and create a durable strategic advantage. Importantly, we've leaned into powerful consumer mega trends, including health and wellness, personalization, convenience and sustainable solutions; to further strengthen our leadership and unlock long-term growth. By adding GOJO and its category-defining Purell brand, we're strengthening our core advantages in scale, innovation and distribution capabilities while unlocking a fully integrated offering with $3.5 billion in sales that expands Clorox's position in health and hygiene for consumers and institutional end-users alike. GOJO is an 80-year-old purpose-driven private company. It invented Purell, a brand that has become virtually synonymous with skin hygiene. As America's #1 hand sanitizer, Purell is a clear market leader and holds leading share positions across both B2B and retail channels. GOJO's deep commitment to innovation and delivering superior value in skin hygiene has built Purell into one of the most trusted names in homes, health care facilities, schools and businesses around the world. This strong foundation of deep customer and distributor relationships and best-in-class capabilities has resulted in decades of consistent performance in the fast-growing B2B channel. Today, GOJO generates nearly $800 million in annual sales and has a long history of delivering mid-single-digit growth with a 3-year CAGR of 5%. Its portfolio generates more than 80% of revenue through a broad and stable B2B network, underpinned by roughly 20 million dispensers that drive recurring demand. The Purell brand, trusted for safe, effective hygiene, is the leader in hand sanitizer across both B2B and retail channels. GOJO is a great fit with Clorox and will create significant shareholder value with compelling strategic and financial benefits. First, it advances our portfolio evolution. This acquisition allows us to realize strong financial performance and capabilities in addition to strengthening our leadership with a trusted brand with both consumers and professionals. Building directly on our core strengths, we believe we can meaningfully accelerate Purell's growth. Second, it positions us squarely in attractive durable categories. Skin health and hygiene benefits from long-term macro tailwinds where brand trust truly matters, and Purell has unmatched awareness, loyalty and credibility with consumers and end users. The skin health and hygiene categories have benefited from favorable and sustainable tailwinds, including elevated interest in hygiene and remaining healthy, increased willingness to pay a premium for quality brands and greater demand for smaller pack sizes. The addition of GOJO increases our exposure to these large and growing categories, allowing us to capitalize on attractive macro dynamics and shifts in consumer and category tailwinds. Third, it unlocks meaningful profitable growth opportunities across end users. GOJO brings deep innovation, B2B relationships and capabilities with state-of-the-art vertically integrated manufacturing, over 680 global patents and cutting-edge dispensing technology. Clorox brings world-class brand building, consumer insights, innovation capabilities and retailer relationships. Together, we see clear opportunities to accelerate Purell's growth in retail while strengthening our professional business through an expanded single-source hygiene offering. Today, approximately 80% of Purell sales are in B2B hand hygiene, while 80% of Clorox brand sales are in retail surface cleaning. These strong complementary market positions create a significant opportunity to drive scale leadership in health and hygiene and unlock substantial cross-selling opportunities across both B2B and retail channels. In B2B, GOJO is a leader with a durable installed base. We believe we can continue to drive core B2B expansion through premiumization and new B2B segments. GOJO's B2B reach and capabilities will also bolster Clorox's already strong professional business as we leverage its commercial, manufacturing, R&D and regulatory experience and expertise. With GOJO, we can lean into complementary B2B vertical strengths, particularly in education, health care, office and government to increase share of wallet, improve customer penetration and grow share. In retail, where Clorox is a household name, we have a sizable opportunity to accelerate Purell's growth potential. Despite limited focus and investment to date, Purell leads the category in both aided and unaided brand awareness. And despite being the leader -- the leading national brand, its household penetration is only 14%, suggesting a significant opportunity as part of our powerful and trusted brand portfolio. By bringing the Purell brand into Clorox's portfolio, it will benefit from our industry leadership, proven brand-building capabilities, consumer-led innovation, distribution and deep retailer relationships. Through our disciplined approach, our focus is centered on incremental growth opportunities that enhance brand meaning and relevance while remaining complementary to the broader Clorox portfolio. And finally and importantly, the culture fit. GOJO and Clorox share a purpose-driven mindset, a commitment to science-based innovation and a focus on long-term value creation. GOJO has a stellar management team and talent base with world-class manufacturing facilities. This gives us strong confidence in integration and execution as we retain the capabilities that make GOJO's model work and integrate in a way that preserves relationships and service levels. GOJO adds a stable recurring revenue stream that is accretive to growth, supports our long-term sales algorithm and provides a consistent earnings base. We are excited about the growth synergies I walked through earlier, and we expect meaningful run rate cost synergies driven by our combined scale and proven holistic margin management capabilities. Luc will speak to the financial details shortly. In closing, this is a compelling combination that makes Clorox stronger, more resilient and better positioned for consistent profitable growth. We are excited for the opportunities that will be created from the addition of GOJO to our portfolio as it expands our leadership in health and hygiene, strengthens our strategic advantages and extends our collective reach across B2B and retail channels. We look forward to welcoming GOJO and the Purell brand into Clorox, and we are confident in our ability to integrate, execute and unlock the full potential of this acquisition to create significant long-term value for our shareholders. With that, I'll turn the call over to Luc to walk through the financial details.

Thank you, Linda, and good afternoon, everyone. I'll provide an overview of the key financial takeaways and details related to the acquisition. As we announced earlier today, Clorox has agreed to acquire GOJO Industries for approximately $2.25 billion with $330 million of anticipated tax benefit, resulting in a net purchase price of $1.92 billion. The deal will be funded primarily through debt financing. We expect to complete the transaction by the end of the fiscal year, subject to regulatory approval and other customary closing conditions. From a valuation perspective, this transaction represents an adjusted EBITDA multiple of 11.9x net of anticipated tax benefits and an adjusted EBITDA multiple of 9.1x on a synergized basis. Turning to GOJO business fundamentals. GOJO has a durable recurring revenue stream, reflected in its long track record of mid-single-digit sales growth and a stable earnings base. As Linda mentioned, approximately 80% of its revenue is generated through the B2B channel, supported by a refill-based model and strong distributor relationships. Importantly, this portfolio also benefits from strong consumer tailwinds with faster-growing categories. Building on GOJO's strong stand-alone sales, we expect upside potential from executing the growth synergies mentioned across both B2B and retail channels and category adjacencies, which will further accelerate growth. In addition, GOJO has a strong margin profile, with adjusted EBITDA margin in line with that of Clorox. We are confident we can achieve at least $50 million in run rate cost synergies and deliver margin accretion by leveraging our combined scale, efficiencies and holistic margin management capabilities. Looking at the financial structure of the deal, the transactions will primarily be funded with debt, raising our net debt leverage to about 3.6x at closing. We expect to be back to approximately 2.5x by the end of calendar year 2027. GOJO generates strong cash flows in line with our targeted level of 11% to 13% sales. The combination of Clorox's and GOJO's strong cash flows as well as significant anticipated tax benefit from the transaction support our confidence in reaching our target leverage ratio while continuing to support dividends. In summary, we expect to deliver strong financial returns, create long-term shareholder value and accelerate the financial performance of the company. The transaction is expected to be adjusted EPS neutral on the first year, and we expect to deliver accretion in the second year. Overall, we expect this transition to enhance Clorox's ability to deliver its financial algorithm more consistently. Lastly, in conjunction with today's announcements, we are reaffirming our top and bottom line outlook for fiscal year 2026, excluding the impact from the transaction.

We will now transition to Q&A, where we'll take questions related to the transaction. As a reminder, we'll address your questions on our Q2 results when we speak to you again during our earnings call on February 3. Paul, you may open the line for Q&A.

[Operator Instructions] And our first question comes from Peter Grom of UBS Financial.

Congratulations. So I guess I wanted to ask a couple of questions just on the growth trajectory of the business. So just the 3-year CAGR of 5%, I think the slide mentions that more than 80% of the business comes from the B2B channel that grows faster. Can you maybe just help us understand what the B2B growth looks like relative to retail? And then I guess, underpinning the B2B growth, how much of that has been driven by growing penetration of dispensers versus growth from kind of the existing footprint? And then just lastly, as we look ahead, kind of the 5% CAGR that we've seen over the past couple of years, is that a reasonable target moving forward?

Peter, I'll kick us off, and then I'll hand it to Luc to talk about some more of the details. But this is attractive in both the B2B and retail space from a category perspective. So as we shared, they've grown about mid-single digits for a very long time, and most of that is from category growth on both sides. And so we are excited about opportunities in both to continue to expand in B2B, and we see lots of opportunities to do that, as I outlined. And then we see significant opportunity in retail. They still only have a 14% household penetration. So there's lots of room for growth. But we're feeling that both categories are faster growing and accretive to our average category growth.

And so Peter, I think it's safe to say that this will be accretive to our growth and really support our long-term sales growth target of growing 3% to 5%. I think two things. First, the acquisition really adds a stable and recurring revenue base that has been growing mid-single digit consistently for many years, and we expect to continue. And this is really supported by the refill-based model that Linda just mentioned as well as strong consumer tailwinds. Now in addition, as Linda mentioned, there, we see upside from the growth synergies mentioned both in the B2B and the retail channels as well as potential categories adjacencies. So when we look at both of those items, we expect the business to grow mid-single digits to high single digits for years to come. And so if you really just translate down on what might be the impact to the company, that would really just translate to about 30 to 50 basis points structurally for years to come.

And our next question comes from Kaumil Gajrawala of Jefferies.

I guess the first question is a little bit on timing. This business has done well for a long time. It's profitable, and it's been around and private for, I don't know what it is, 70 years or so. So sort of why is now the right time? Is it -- why is it now the right time maybe for them, the right time for Clorox to do what's, I think, one of the largest deals that you've done in maybe forever?

Kaumil, thanks for the question. Certainly, a large deal for us. We're very excited about it. And thanks for the question on timing. This is a really unique opportunity to have a company like GOJO that has been growing really solidly for decades and been able to take a brand like Purell and build that into a world-class brand. But they're at a point now where they see so much opportunity and they need a partner to help them do it. And at the same time, on our business, we've had great success in our Health and Wellness business. And if you look at the 10-year CAGR for our Health and Wellness business, it's been 4%. It's our largest, fastest-growing segment. And so we see the opportunities that they have that they feel like they can't unlock on their own. And certainly, our opportunity to continue to accelerate progress on our cleaning business as a way to do this at scale. And so we really believe it's the right time to come together and advance this. And the other thing that I'd mention from a timing perspective, we feel good about our plans for this year. You heard us reaffirm our outlook on top and bottom. It's certainly been a difficult environment, but we're seeing our plans come to fruition. Obviously, we'll talk more about that coming up on February 3. But we're confident in those plans, and we feel like we have a disciplined integration plan, and we're ready to go. So I think if you talk to both of us, we would say this is the right time because we feel the scale of this, the opportunities on both sides, these two complementary organizations coming together offer exactly what's needed for us to continue to accelerate growth.

Okay. Got it. And maybe from the context of returns, Clorox has always been very good at thinking with an EVA mindset or returns mindset. We have your sort of accretion guidance that you provided in the press release, but how are you thinking of the returns, especially in the context of a business that is expected to grow mid-single digit, high single digit, plus the $50 million? Where does that return profile look like versus what you guys use for your own WACC?

Yes. Sure, Kaumil. I would say, in addition to the strong long-term strategic benefit, the acquisition is expected to deliver very strong financial returns well above our cost of capital. And of course, we always compare those returns relative to other potential use of cash.

And our next question comes from Anna Lizzul of Bank of America.

My understanding is that GOJO had a deal that fell through to one of your peers in 2023. And I was wondering if you had looked at GOJO at that point in time. And I know, just building on the last question, what makes the company more attractive almost 3 years later versus at that point in time if you had taken a look or if you had passed on that? And also, Purell has been around for a while, and it launched in the consumer market, I think, in 1997. What do you see here as maybe additional distribution opportunities or innovations for that brand?

Yes. I won't comment on the old process in any detail. Certainly that I don't have. But I would just maybe remind you, in 2023, we went through a cyber attack. So we were busy recovering from that. But I'll tell you, we've long admired this brand, we've long admired this company. And we've been watching them over the years, growing and always keeping our eye to see what the next step was and would there be something we'd be able to offer them and with what would they be able to offer to us. So this is certainly the right time. And then from a retail perspective, we're really excited about the opportunities for Purell because they are so strong in B2B and they have tremendous innovation capabilities and regulatory capabilities and manufacturing on that side and they have really cool dispensing technologies, et cetera. They've just simply not had the time to fully focus on the retail side. And they've done great work. I mean they're a [ 45 ] share position, they have a very strong position in that channel, share leading, but they haven't spent much on marketing. They don't devote as many of their innovation resources to the retail side. So we believe unlocking our brand building, our marketing capabilities, our innovation machine, consumer insights as well as our holistic margin management program that we can do to make sure that we continue to drive efficiencies is really going to help us accelerate this business, and they're really excited about what we can bring to the table on the retail side.

And our next question comes from Robert Moskow of TD Cowen.

A competitor of yours bought a competitive hand sanitizing brand that kind of competes at the higher end of the spectrum. I was wondering if the Purell brand had been impacted by the growth of that high-end competitor in any way at retail or whether it's been undisturbed?

Yes, Robert, we've seen -- this is a place where the category is expanding and new users are entering, so we haven't seen any meaningful impact. It gets us excited about the opportunity here. Younger people care about this category. They are aware of hand health and hygiene. These kids grew up in COVID, so they're very aware. And we see category expanding opportunities, I'm sure, just like our competitor does.

And our next question comes from Filippo Falorni of Citi.

So maybe, Linda, given you mentioned the big opportunity in the B2B channel and the fact that it's already 80% of Purell sales, can you give us a sense of the addressable market there? How you're thinking about it going after those opportunities? What is the penetration of Purell in some of the big B2B channels, I think offices, airports and so forth; where you really see the opportunity? And then in terms of competition, can you talk about like how is it different there? Like it seems like they have a clear advantage relative to retail. And maybe like within retail, there's obviously a premiumization asset, but there's also a private label competition. So how are you thinking about the competitive landscape in retail versus B2B?

Thanks, Filippo, for the question. Why don't I start there on the competition side. And if you look at the B2B space, this is a place where they have very deep B2B relationships in a number of verticals and actually very complementary verticals to what Clorox has. So we see both sides being additive, where we have a very strong portfolio of items in certain verticals, they have a very strong set of items in other verticals. And so we see the ability to cross-sell is really high. From a competitive perspective, just like we do in retail, there are private brands in this space and other smaller brands. But this is a place where branding really matters. And in fact, if you see the dispensers on the wall, you'll see they are branded. And this gives people the reassurance in a space where hand health and hygiene and skin health and hygiene is incredibly important. You're talking in hospital waiting rooms, doctors' offices when you're traveling, that brand means so much. And the Purell team has done a terrific job in ensuring that they get dispensers on the wall, that those are branded, that consumers at those places in B2B are reassured that they are using a product that's going to work. And so we see continued opportunity, one, to expand into different verticals with an enhanced end-to-end solution. And we see the opportunity to continue to get dispensers on walls. And of course, we have the installed base of 20 million dispensers already out there. And those dispensers stay on the wall for about 7 years, and we're consistently selling refills. So competitive set, we feel good about and much like we compete in today on our B2B business. On the retail side, I think I'm going to tell you a story about the power of this brand. It was one of the things that we have been following, and we experienced some of this during COVID, but I think this gets you maybe to the same place we are about how special this brand is. During COVID, the Purell team had to make what was a very easy and a very difficult decision at the same time. They had to stop selling their brand in retail in order to supply enough doses in the professional space. And they worked tirelessly day and night to get as much capacity as they can, but they literally went to a zero share in retail. And I think everybody thought, okay, hand sanitizers was just going to be commoditized, et cetera. And of course, the team went back to a large customer and said, "Hey, we believe in the Purell brand, give us a test." They did. It was an immediate success. And in well under a year, they were back up to a 45 share, and it was expanded nationally nearly overnight. That's the power of this brand. Consumers, even when they had years of being exposed to private label, choose the branded player. They want the experience, they want the germ kill, they like the overall formulation, et cetera. So I hope that helps you understand what we see as the power of the brand, even being out of stores for that long for consumers to come back and for retailers to get it back in stock so fast.

Great. That's helpful. And just on the B2B following up, like any sense of like addressable market and the market share within B2B?

We'll talk more about some of the details coming up here. But here's what I would say. We are a leader in hand sanitizer. We're the #1 share. And so they have a very strong position. And it varies by, as you can assume, verticals. And they're very, very strong in health care, they're very strong in government, et cetera, but they are the leader in B2B.

[Operator Instructions] And our next question comes from Lauren Lieberman of Barclays.

I was just thinking back to kind of the 2020, 2021 time frame when you guys really increased your focus on building your own B2B business. I know it had been a part of IGNITE, part of the strategy for a while, but you really saw that as an opportunity to accelerate. Maybe you can talk a little bit about sort of what the hurdles were to that playing out in a more substantive fashion? Because one of the things that strikes me that the Purell business as strong as it is, it's still going through distributors. So to get that cross-sell, it's not really a direct sale, it's still through the distributor network. So just little thoughts maybe on lessons learned from, let's call it, like your first direct go at the channel and how you can leverage that as you now look to capitalize on the cross-sell opportunity with Purell.

Yes. Thanks, Lauren. Our [ Pro ] business for a very long time, and thank you for acknowledging that, has been a strong contributor to the company, growing mid-single digits and certainly, you call it, in the right period in COVID, where there was ups and downs to everyone's business. We had years that were much stronger, and then we had to lap some of that. But overall, this has been accretive to the company and a mid-single-digit grower. And what we have found, which is a really unique position in the B2B space, and Purell has exactly the same and complementary position; is the power of a brand that consumers recognize that's in a form where the brand matters, it's right when they wash their hands or when a nurse is wiping down a station in a hospital room and they're worried about what disease has been in there. That brand matters, the quick form matters. It's not the diluted chemistries in the back that a janitor is using, but this is reassuring a human who uses these same technologies in their home that they're getting the right experience. That has been an unlock for the Clorox brand. And we have seen Purell do exactly the same thing. And so the lessons that we're applying together, scale will be helpful here. So this is a place where some of our growth is limited by our limited scale in B2B. So this makes our portfolio significantly bigger. And to your point on distributors, in many cases, we are selling to these large end-users directly now. And Purell will have that capacity and capability to do that, and they have very sophisticated relationships with these end users. So we feel there's significant upside there. I think the other lesson is there's halo going both ways. So when you are doing marketing in the retail side, that is impacting the B2B business and the purchase decision as well as when you have a dispenser on the wall that says Purell or a canister that says Clorox, consumers are noting that that's what doctors and nurses are choosing, that's what airports are choosing, and that reinforces their behavior at home. So we think this is a very unique place to play in B2B, where there's ready-to-use products with strong margin profiles and really the consumer branding matters. And the lessons for us are scale, which GOJO brings, innovation matters in the space. You have to have the very best of the technologies, and we do and Purell does as well. And then I think to your good point, this requires a different selling organization, which we have a lot of skill in our professional business, but GOJO brings a different level of that to the table.

And our next question comes from Andrea Teixeira of JPMorgan.

We -- I was just like hoping to see some -- to get some clarity on the execution of some of the synergies. And Linda, you and Luc have both talked about the opportunity to distribute and the low household penetration. I'm assuming none of those are included in the numbers you provided today. Just curious, how we should see it evolving, the timing of the cost synergies? And then as we go into the revenue synergies and innovation, how we should be thinking at the path forward to get the realization of that? And then related to that, I understand you didn't give us like the actual EBITDA and backing out the debt that you're getting from the transaction. I mean you're obviously financing, as you said with that, but you're also like assuming some debt. So if you can kind of help us with the timing and how to absorb and how to take that leverage, as you pointed out, to 2.5 and how long it would take?

Andrea, I'll start, and then I'll hand it over to Luc. If you kind of take a step back on what this brings, we certainly see the opportunity for growth and revenue synergies. And as Luc highlighted at the beginning, their CAGR for the last 5 years -- 3 years, excuse me, has been 5%, so mid-single-digit grower. And what we see is opportunities in both the retail side and B2B side, getting us to mid- to high single digits over a number of years. So you can see, we -- the two companies coming together offer significant opportunities on the growth side. On the cost side, we highlighted the $50 million. And I would say we've been fairly reasonable and conservative on that. And as well as we plan that into the timeline and how we're going to integrate, we feel very confident in our ability to deliver those and hopeful that there's upside given our holistic margin management tools, et cetera. Maybe one of the things I would note on that timing and as we think about integration, we have, as I said, a very detailed thinking on how we will integrate. We have a disciplined way of thinking about the value creation and when we will do the different parts of this integration to ensure that we're getting those value pieces. But I feel great because I feel like we've been conservative and that we have strong line of sight to what we just shared in terms of both top line and bottom line.

And maybe I can take your question on the debt. Yes, as we mentioned at the time of the close, our debt leverage will increase to 3.6x. And we are confident that we can take this down to 2.5x by the end of calendar year 2027, okay? And so I think given the combination of Clorox and actually GOJO's strong cash flows as well as we have the benefit of anticipated tax benefits in the first 2 years that will be fairly material, that will help us repay some of the debt, and we're confident that we will reach our target leverage ratios while being able to continue to support the dividends. So I would say near term, like balance sheet discipline and deleveraging as well as supporting dividend is really our priority, and I will take priority over share repurchase. So we do not expect to make any share repurchase until we reach our targeted debt-to-EBITDA ratio.

And our next question comes from Kevin Grundy of BNP Paribas.

Two quick ones, I hope. Linda, can you and Luc as well maybe comment on the scope of the due diligence process and how you got comfortable with this? How you can get investors comfortable with this asset and integration risk. I guess just given some of the history with Clorox and perhaps some of the transactions, which maybe did not perform as well as you would have hoped. And I ask that in the context that this is a decent-sized deal relative to the company's market cap. So maybe just some comments here around due diligence, comfort and integration risk. And then I have a follow-up.

Sure, Kevin. I'll get started. As you can imagine, we went through an extensive due diligence process on this. And we went deep getting to know their business, getting to know inside and out what's going on in regulatory manufacturing, what goes on in innovation, et cetera, and we were really excited about what we saw. And then we spent time thinking a lot about our own business and were we at the point where we felt that our businesses were on the right track according to our plan, and we do. And we spent a lot of time with our Board of Directors and our advisers ensuring that we were ready to go on integration. And your point is fair, we haven't made an acquisition in a while. But I do feel confident given we made 2 divestitures and although that isn't nearly as complicated, you still have to unwind a lot of things in your company, and we did that seamlessly. But we've been spending time building capability in this space. The other thing I'd note is the comment that I made when Andrea asked her question. We've been fairly conservative in the assumptions on the synergies, and we have timed those to ensure that we are very, very thoughtful and disciplined on this integration. And we have a team ready to go once we close to get that going. But our Board, our management team, we've been preparing for this moment for a while. We look at a lot of assets. This is absolutely the right asset for us and a place that we have shown strong performance for many, many years and where we're ready to jump on it, and we have full confidence we'll be able to execute as well as deliver on our core plan.

Great. I agree. And -- go ahead, Kevin.

No, please, go ahead. And I have an unrelated follow-up, if you don't mind. Go ahead.

Sure. No, I was going to reemphasize that I think the acquisition case is based on a fairly conservative approach on cost synergies. So we have a high degree of confidence in achieving at least $50 million and seeing material upside. As we combine the businesses, we expect cost synergies across the entire structure and including material savings in supply chain, manufacturing, logistics, procurement, there's a lot of overlap, I think complementarity. And -- but from a timing standpoint, we expect to see the majority of cost savings probably completed in the next 2 to 3 years, and that's actually reflecting what Linda just mentioned. There is really a strong governance and plan in place to both realize the synergies in an efficient manner while maintaining the strong and derisked integration as this is really our top priority.

Okay. Very good. The quick follow-up, and I appreciate the time, just the ability to innovate in this product category, so I think historically, has been known very good execution in some tough categories, more prone to higher private label penetration. What would you say on the push to that? Is this not just kind of doubling down on another more commoditized sort of product category that's going to be more difficult and more sort of prone to private label penetration? So any comments you have on the innovation pipeline or in response to that sort of push would be appreciated, and I'll pass it on.

Sure, Kevin. If you just look at the categories, they have tailwinds beyond what many of our categories have from a growth perspective, and those have been pretty durable tailwinds for a long time. And this business has grown for mid-single digits for a very, very long time. And even coming out of COVID with all of the noise of that, that's returned to that stability. So we feel very good that the categories are accretive and that innovation works in these categories. In the B2B space, this team has an incredible lineup of innovation from the dispenser to the refills to the product. And maybe we'll show some of this coming up here at CAGNY so that you can see it live in action, but they have a very sophisticated innovation department, very sophisticated on the dispenser technology and other things that we'll bring to life in CAGNY in more detail. And then on the retail side, there's a lot of opportunity in form. We also see category expansion opportunities with the brand. But we have seen time and time again, these are the types of categories because brand matters so much, because product experience matters so much, just like they do in Clorox; that we are able to innovate, command a premium and continue to advance the category. And the like, I'd say, Kevin, why we have so much confidence is not only Purell's performance, but our own, and I'll return to the point. Our Health and Wellness business for a 10-year CAGR of 4%, that is significantly accretive to the company. And so -- and we've done that time and time again in a place I think many of you have argued, could be commoditized and has a risk of private label, but we've been able to create new experiences for people, make it more convenient, give different forms, take on new tasks. And there's plenty of room to do that in this category, just like we've proven for many, many years in our Health and Wellness business.

And our next question comes from Olivia Tong of Raymond James.

Can you talk about what the growth for Purell looked like pre-COVID? Just was it also in that mid-single-digit percentage or what? And then as you think about the opportunities ahead of you, can you talk about how this helps the existing business and whether you think there's more opportunity leveraging their B2B reach for the Clorox brands or your ability to bring Purell into more households? And then lastly, what do you think about the international opportunity here and I guess, just as importantly, your ability to capitalize on that international opportunity?

Thanks, Olivia. On the growth piece, this has been consistently growing mid-single digits for a very long time, decades. And of course, like any business, it can have ups and downs depending on the year. And certainly, COVID was a time where there was incredible growth and then had to come back just like we did from a wipes and other disinfecting perspective. But this has been a mid-single-digit grower for a very, very long time, consistent with what their last 3-year CAGR was at 5%. And again, we see opportunities to go beyond that given the combination of the two companies. On the existing business upside, what we're really creating here is a scaled end-to-end solution. And that's true both on the retail side, and I'll maybe give you an example, of how that could look and then certainly on the B2B side. From a B2B perspective, I mentioned a little bit about this, but we have a lot of strength in some verticals, and they actually have a lot of strength in complementary verticals. And we think a bundled offering creates more relevance to those end users and opens up more conversations, more opportunities to sell because in the B2B space, you don't want to be working with a bunch of small manufacturers, et cetera, and Purell has very deep relationships in the B2B space. We have good relationships as well, but they happen to be in different verticals. And so we see the cross-selling opportunity of our powerful Clorox and other brands we sell in [ Professional ], and Purell is additive to growth and something that we couldn't do alone. And then on the retail side, let me just give you an example of how this might come to life. Today, we have a very big cold and flu program, for example. Back-to-school is another time where we're really introducing people to our products, and it's been fundamental to household penetration growth over the long run and fundamental to that 4% CAGR that I spoke about over the last 10 years. It's an opportunity to create scale with a solution for skin health and hygiene, surface health and hygiene that we haven't had before in a more material way. And these are the things where 1 and 1 starts to equal 3. And we're pretty excited about those opportunities in addition to applying scaled capabilities in this space, things that we're doing on consumer insights. Internally, we get a lot of scale from that end-to-end solution, but we really think this is an opportunity to lead even more than we do in health and hygiene in both retail and B2B and unlock opportunities we just couldn't do on our own. International, Olivia, I'm going to -- before you have to correct me for not answering that one, let me jump in and cover international. We have very little international upside, if any, really, in our case. And so that -- they do have an international business. It's about the same slightly smaller percentage-wise than ours is. Ours is about 15%. This is slightly lower than that. But here's how I would think about it. This is one, just like we have in our Health and Hygiene business in international, it has been a strong grower. You see our international business growing mid-single digits. It's mostly a cleaning business. And we will approach this the same way as upside. Where we have opportunities to create scale in the markets that we're in, where Purell maybe already is or is not, we will do that work. Of course, we will first deliver the valuation case, but we are absolutely looking at opportunities that we could take this and expand our growth in international.

And our next question comes from Chris Carey of Wells Fargo.

So yes, just maybe more bigger picture and strategic, so we have a transaction today, which is a form of doubling down on cleaning in your kind of core categories, core competencies. We have a recent transaction to exit the VMS business. There's been some consolidation in international. Do you think it's overreached to view this as broader strategy to refocus or increasingly focus the portfolio behind areas that you have scale? And we get questions all the time about just why the portfolio is the way it is and what is the long-term vision? Are we -- is it fair to think this is in the construct of a broader thought process on the portfolio, which is evolving as we're seeing sluggish category growth rates and high levels of competition, a higher level of focus on portfolio at the Board level? Or is this just kind of an interesting opportunity that you've been watching for some time that kind of came together? I'd just love any thoughts on that. Any sort of context that you could provide on kind of the bigger picture and what it all means with the longer-term aspirations of your business, that would be helpful.

Yes, Chris, this is absolutely leading into our strengths. And let me maybe back up to why. When we first launched our IGNITE strategy back in 2019, we spoke about evolving our portfolio being a very important component and that we wanted to increase the health of our core business, but we also wanted to lean into consumer trends and that we were looking for businesses that were accretive to growth for us and profitable. And of course, the last 5 years have been quite busy since we released that strategy between COVID and cyber attack and everything that's been going on, but we've been diligent at work looking for what is the right place where we could place a bet. And clearly, we feel very strongly that our business in health and wellness is very strong and something we can build upon, create more scale. We have advantage. And we've proven it time and time again, we can grow market share. We have sales accretive to the company at 4%. And if you think about the size of that business, nearly 40% of our business is in the Health and Wellness segment. And then if you look at international, which grows mid-single digits, that adds another 15%. So we do see this as a move of getting stronger where we're strong. And of course, we'll continue to evaluate our portfolio with that lens. We're always doing that with our Board. We were ready to go when this opportunity presented itself because of that work. And we remain open to other portfolio moves that are aligned with our strategic position and continuing to make us a stronger, more resilient, faster-growing company.

And our next question comes from Steve Powers of Deutsche Bank.

I don't think these have been covered. I'm sorry, I joined a little bit late. The first one is just on the, I guess, the manufacturing process for the Purell brand and the supply chain. I think that's mostly manufactured in-house. If you can confirm or discuss that. And to the extent that it is, can you talk about just, I guess, the capacity and whether, based on your growth aspirations, there's growth CapEx and cash costs that we should think about associated with the, I guess, the asset intensity of the business?

Steve, yes, thanks. No, this is an incremental question, so thanks for asking it. Manufacturing, this is one of the areas we were so excited to learn about as we got to know this company. They are in-house manufactured, vertically integrated, and they invested in significant capacity during COVID, and we have plenty of room to grow. We also have room to drive the synergies that Luc spoke about, that $50 million come in a number of formats, manufacturing included and our ability to use some of that capacity and including other places like procurement, logistics, et cetera. But they have state-of-the-art manufacturing facilities and of course, products with all the patents that they run through there, but they have a very, very strong and a place -- a very strong manufacturing process and discipline and something that looks just like the Clorox company, and that's why we're so confident in the integration.

Perfect. And then I guess on the margin profile, of the business. I guess, the gross margin profile relative to the current portfolio and if there are, I guess, any differences between B2B and retail and to the extent that the business shifts over time -- mix shifts over time more to consumer and retail, just incremental advertising needs, just how the P&L of the Purell business may evolve to the extent that there is an evolution to think about there?

Yes, Steve, I can take that. So not unlike our professional business, there's a few differences when you look at the line item on the P&L. For example, you mentioned it gross margin is a little lower, but operating expenses as well are lower. Over time, I think what we probably will see is the benefit of the synergies that probably be like the biggest incremental change. And you might -- as we -- there's an acceleration potentially on the consumer side, you're right, we could see some change in advertising and sales promo. So maybe just a balance. But net, we expect margin to increase going forward, mainly driven by the benefit of the synergies.

And this concludes the question-and-answer session. Ms. Rendle, I would now like to turn the program back to you for some closing remarks.

Thank you for your questions today. As we close out the call, let me leave you with a few final thoughts. The acquisition of GOJO Industries expands Clorox leadership in health and hygiene. It builds on our strengths, leverages our unique advantages to accelerate Purell's growth and will enhance our B2B offering. Importantly, today's announcement reflects continued progress against our strategy. As you've seen, we've been executing a series of deliberate value-creating actions to accelerate profitable growth. This has included expanding our participation in attractive categories, fueling brand-led and consumer-driven innovation, modernizing our capabilities, including our digital transformation, streamlining our organization and importantly, evolving our portfolio. Today's transaction represents us leaning into our largest, fastest-growing and most profitable segment, health and wellness. In closing, I'm excited about this compelling opportunity for Clorox, and I'm confident in our ability to execute and create long-term value for shareholders, customers and teammates. Thanks again, and we look forward to sharing more on our Q2 earnings call on February 3.

This concludes today's conference call. Thank you for attending.