Unilever Buyouts Dollar Shave Club for a Billion Dollars

Late yesterday, Unilever (NYSE: UL), the European consumer products giant behind Dove soaps and Axe body sprays, announced that it was acquiring the Venice, Calif., startup. Although terms weren’t disclosed, but people familiar with the matter said Unilever is paying $1 billion in cash.

Four years ago, Michael Dubin launched his company with a hilarious YouTube video poking fun at the pain and expense of shaving. The video went viral and created the Dollar Shave Club. Now Mr. Dubin is selling his startup for $1 billion.

Dollar Shave Club, which isn’t profitable and has chipped away at market leader Gillette, said it has signed up 3.2 million members for its mail-order service that ships out disposable razors and other grooming products for a flat monthly fee.

Mr. Dubin’s company has been growing quickly by adding customers as well as new product categories, such as hair gels and most recently body washes. The startup had revenue of $152 million last year and is on track to exceed $200 million in 2016, according to Unilever.

The sale comes about a year after the Dollar Shave Club was valued at $615 million in a $75 million funding round led by Technology Crossover Ventures, according to people familiar with the matter. The company has raised at least $150 million in venture capital.

Dollar Shave Club offers to send razor cartridges directly to customers for as little as $1 a month, a model that appealed to the changing shopping habits of consumers fed up with the rising cost of a clean shave.

Hence, it is quite obvious that this deal, in addition to giving Unilever an entry into the shaving market dominated by U.S. rival Procter & Gamble Co.’s Gillette, will also introduce Dollar Shave Club’s direct-to-consumer business model to Unilever with “unique consumer and data insights,” said Kees Kruythoff, president of Unilever North America.

Privately, P&G executives acknowledge the company was caught off guard by success of Dollar Shave Club, which started in 2012. “It was probably on the radar but we weren’t necessarily having the right conversation around what might disrupt us,” said a person familiar with the company’s thinking.

 “The razors were just very cheap, that was the draw,” said Kurt Jetta, founder of TABS Group, a retailer and consumer analytics firm.

Mr. Dubin, 37 years old, will remain CEO of Dollar Shave Club. He said Unilever promised Dollar Shave Club autonomy within the company and resources to help fuel more growth. The company will operate as a subsidiary of Unilever. He said Mr. Kruythoff proposed the acquisition after the two executives had spent time discussing a potential Unilever investment in Dollar Shave Club.

“If we can deploy those resources in service of our mission we are that much more,” he said in an interview. “It just felt right to me and I really trust the people I met at the Unilever.” Mr. Dubin said, and confirmed that he will report to a board that includes top-level Unilever executives. 

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