The Spin-Off Report

THE SPIN-OFF REPORT

June 9, 2015

Energizer Holdings Inc. (Pre-Spin)

Current Share Price (6/8/15): $136.42 Ticker: ENR Fair Value Estimate: $144 per share Dividend: $2.00 Shares Outstanding: 62.2 million Yield: 1.4% Market Capitalization: $8.5 billion

Edgewell Personal Care Co. (Post-Spin)

Fair Value Estimate: $101 per share Ticker: EPC Shares Outstanding*: 62.2 million Dividend: Nil Market Capitalization: $6.3 billion Yield: N/A

Energizer Holdings Inc.

Fair Value Estimate: $42 per share Ticker: ENR Shares Outstanding*: 62.2 million Dividend: $1.00 Market Capitalization: $2.6 billion Yield: 2.4%

*Assumes a distribution ratio of 1:1. N/A – Not applicable. Note: Market capitalization is based on fair value estimate for post-spin entities and current market cap for pre-spin Energizer Holdings Inc.

Michael Wolleben Research Team Joanna Makris Robert Dunn Murray Stahl Steven Bregman

PCS Research Services Thérèse Byars Ryan Casey James Davolos Derek Devens 14 Wall Street, 3rd Floor New York, NY 10005 Peter Doyle Rory Ewing Matthew Houk Utako Kojima (212) 233-0100 www.pcsresearchservices.com Eric Sites Salvator Tiano Fredrik Tjernstrom Steven Tuen Eric Zhou

Institutional Research Group (“IRG”) is the author of this report. PCS Research Services (“PCS”) is the exclusive marketer and an authorized distributor of this and other research reports created by Horizon Kinetics LLC (“Horizon Kinetics”). Horizon Kinetics is the parent holding company to several SEC-registered investment advisors, including Horizon Asset Management LLC and Kinetics Asset Management LLC. Certain portions of this report may have been drafted by IRG based on information, ideas and data provided by Horizon Kinetics. Horizon Kinetics, IRG, PCS and each of their respective employees and affiliates may have positions in the securities of companies mentioned herein. This report is based on information available to the public, and no representation is made with regard to its accuracy or completeness. This document is neither an offer nor a solicitation to buy or sell securities. All expressions of opinion reflect judgment at the date set forth above and are subject to change. All views expressed in this research report accurately reflect the research analysts’ opinion about the subject matter contained herein. No part of the research analysts’ compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analysts in the research report. Reproduction of this report is strictly prohibited.  Horizon Kinetics LLC® 2015.

Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Investment Thesis

On April 30, 2014, Energizer Holdings Inc. (NYSE: ENR) announced plans to separate into two standalone publicly traded companies: one a personal care company and one a household products business. Shares of the household products company (“New Energizer”), which will retain the Energizer Holdings Inc. name, will be distributed via a tax-free distribution of shares to ENR shareholders. The parent company will be rebranded Edgewell Personal Care (“Edgewell”) and will trade on the NYSE under the symbol “EPC”.

Shares of New Energizer will be distributed to ENR shareholders of record as of June 16, 2015, on July 1, 2015 before the market opens. Shares of New Energizer and Edgewell Personal Care will trade on a “when issued” basis beginning on June 12, 2015, under the tickers “ENR WI” and “EPC WI”, respectively. Shareholders of record will receive one share of New Energizer for every share of ENR held as of the record date.

The two segment heads will become CEOs of the respective companies. David Hatfield will serve as CEO of Edgewell, and Alan Hoskins will be CEO of spun-off New Energizer. Current ENR CEO Ward Klein will become Executive Chairman of Edgewell, whose leading brands include Schick shavers, Edge shaving cream, and Playtex feminine products, as well as Banana Boat and Hawaiian Tropic sunscreens. Household products included in New Energizer include Energizer and Eveready branded products as well as portable lighting products.

The separation makes sense from the point of view that the growth trajectory of the personal care business is opposite to that of the household products business. Personal care has opportunities for growth through increased penetration in international markets and via acquisition. The household products business, dominated by the sale of batteries, operates under the overhang of demand that is shrinking, albeit modestly, and it could be managed to maximize cash flow while maintaining market share and returning capital to shareholders. In this view, ENR’s separation can be compared to the recent wave of spin-offs conducted by media companies jettisoning their newspaper businesses, which were in the midst of a more pronounced secular decline, in favor of the growing television and broadcast businesses. The stagnant household products business has been a drag on the company’s valuation multiple as ENR shares have traded roughly in line with household product peers, which have traded at a discount between 20% and 30% versus personal care peers over the past five years. With personal care competitors trading at a premium to the slower-growth household competitors, the separation should allow each company’s valuation multiple to be rerated. The obvious benefit of the rerating is that the personal care business, which has been the beneficiary of almost all of ENR’s acquisitions since it became a public company in 2000, should be able to lower its cost of capital for funding future transactions.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT comparables and cash flow generation, post-spin New Energizer can be fairly valued at $42 per share. The stable cash flow generation potential of the battery business could be an attractive asset to financial suitors down the road. Based on a leveraged buyout scenario with arguably conservative assumptions, upside for New Energizer exists to $57 per share, although it must be noted that a potential takeout is not likely to occur in the near term, in order to preserve the tax- free nature of the spin transaction. While the near term probability of a takeout of New Energizer is not high, the 2- to 3-year time horizon can be viewed as a positive in that it assists in the creation of an equity yield curve. Based on the derived fair values and upside scenario, the potential annual returns are 10% - 15%, which does not account for potential share repurchases, debt retirement, or exceeding operational targets that could result in increased returns.

Edgewell Personal Care’s go-forward strategy includes accelerating top-line growth, systemic cost reduction, and generating substantial free cash flow, in addition to conducting selected acquisitions. Domestic revenue has disappointed recently, as declining sales of legacy products have been only partially offset by new product sales and international growth. To compound the company’s domestic sales decline, the current impact of a weaker U.S. dollar is offsetting some of the international growth currently being experienced. Assuming a return to modest top-line growth (2%) and margin expansion from continued cost cuts and plant rationalization, Edgewell Personal Care can be fairly valued at $101 per share based on peer multiples and cash flow generation.

It has been widely noted in the financial press and investor circles that Edgewell could be an attractive takeout candidate for a strategic buyer due to its market-leading brands and cash flow generation, added to a growing international presence. The structure of the spin-off of New Energizer, with Edgewell being the legal parent entity, places much fewer restrictions on a potential acquisition of Edgewell in the near term. Indeed, ENR was spun off from Ralston Purina in 2000, with the parent (Ralston) being acquired within approximately a year and a half after the transaction. Framed in that manner, Edgewell probably is awarded a premium multiple, which may explain ENR’s share price performance since the spin announcement. The shares have appreciated approximately 40% since the announcement, versus 16% for the S&P 500, implying that shares of Edgewell may already price in a takeout.

On a pre-spin basis, ENR can be valued at $144 per share, with upside to $158 based on a future potential takeout of New Energizer. Given the viewpoint that the current share price incorporates a takeout premium for Edgewell, shares of ENR are not recommended prior to the spin. Instead, we believe investors should look for attractive entry points in New Energizer following the spin- off. As a point of reference, after the 2000 Ralston/Energizer spin-off, shares of ENR underperformed the S&P 500 over the first three months of regular-way trading, before significantly outperforming in the first two years of regular-way trading.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Company Description

Energizer Holdings Inc.’s (NYSE: ENR) history traces back to when Russian immigrant Conrad Hubert (formerly known as Akiba Horowitz) was operating a novelty shop in New York City under the name of American Electrical Novelty and Manufacturing Company. In 1898 David Misell, an employee of Hubert’s, invented the so-called battery-powered torch, referred to today as a flashlight. The patent rights to the flashlight were assigned to American Electrical Novelty and Manufacturing Co., which marketed the flashlight under the Ever Ready brand name. In 1905, Hubert renamed the company The American Ever Ready Co., and in 1914 the entity was sold to the National Carbon Company, which was merged with Union Carbide in 1917 to form Union Carbide & Carbon Corp. (Union Carbide). In 1980, Union Carbide began marketing its battery products with the Eveready brand. Union Carbide sold the Eveready Battery Company to Ralston Purina Co. for $1.4 billion in 1986. Ralston Purina subsequently spun off Energizer Holdings Inc. into a standalone, publicly traded company. At the time of the spin-off, Energizer Holdings sold a variety of batteries, including consumer and industrial, as well as portable lighting products, including flashlights. In F2000 (September end), the company generated sales of $1.9 billion.

Since the spin-off, ENR has broadened its product portfolio outside of batteries and lighting into personal care products via acquisition, beginning with the 2003 purchase of the Schick and Wilkinson Sword razor business from Pfizer Inc. (NYSE: PFE) for $930 million. The expansion into razors was viewed as a natural fit given that customers for razors (retail stores such as drugstores) were essentially the same as those for batteries, creating synergies from a sales force and distribution point of view. Despite the sales synergy, the acquisition would pit ENR directly against Gillette Co. in both categories, and would lead to intense competition and market dynamics that have negatively affected ENR’s sales due to Gillette’s aggressive actions over recent years (discussed in the “Outlook” section of this report). The expansion into personal care products could be viewed as prescient, given that the advent of rechargeable multifunction electronics, such as smart phones, has caused the battery industry to enter a slow secular decline. While Energizer has batteries that are rechargeable, they are more focused on cylindrical cells (AA, AAA, C and D) and 9V for use in consumer electronics such as remote controls versus being built into smart phones and tablets.

Additional major acquisitions include the 2007 purchase of Playtex Products Inc. for $1.9 billion; its product portfolio included feminine care products, skin care products (including Banana Boat and Hawaiian Tropic branded sun-care and suntan lotions), Wet Ones moist wipes, and gloves. Energizer augmented its position in the shaving market with the purchase of the Edge and Skintimate shave preparation business from S.C. Johnson & Son Inc. in 2009 for $275 million (see Exhibit 1).

Today, Energizer Holdings generates annual revenue of $4.4 billion and adjusted EBITDA of $881 million (see Exhibit 2). The company reports results in two segments: Personal Care, consisting mostly of products acquired with the Schick, Playtex, and Edge purchases, and Household Products, representing the legacy battery and portable lighting products. Personal Care contributes 58.7% of revenue and 58.3% of segment EBITDA, operating with a 23.4% segment EBITDA margin. Household Products had a 23.8% EBITDA margin in F2014. Since

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT F2007 the Personal Care segment has grown from a 29.4% revenue contribution and 26.8% EBITDA contribution, largely due to the previously mentioned acquisitions and declining battery sales. International sales represent 49% of revenue, including Canada, which itself contributes 5.3%.

Exhibit 1 Energizer Holdings Inc: Historical Acquisitions ($ in millions) Announced Announce Total Value Date Target Name Seller Name (mil.) 12/31/2014 Tximist Batteries Shenzhen Ltd Celaya Emparanza y Galdos Internacional SA N/A 7/31/2013 Stayfree,o.b.,Carefree Johnson & Johnson $ 185.0 10/11/2010 American Safety Razor Co LLC Lion Capital LLP $ 301.0 5/11/2009 Shave preparation unit SC Johnson & Son Inc $ 275.0 7/12/2007 Playtex Products Inc $ 1,773.8 1/21/2003 Schick-Wilkinson Sword business Pfizer Inc $ 930.0 Total $ 3,464.8 Source: Bloomberg.

Exhibit 2 Energizer Holdings Inc.: Historical Operating Results ($ in millions) F2007 F2008 F2009 F2010 F2011 F2012 F2013 F2014 1H F2014 1H F2015 Revenue Household Products 2,376.3 2,474.3 1,890.3 2,199.7 2,196.0 2,087.7 2,017.1 1,835.5 937.1 858.1 Personal Care 988.8 1,856.7 2,109.5 2,048.6 2,449.7 2,479.5 2,448.9 2,612.2 1,239.2 1,188.2 Total 3,365.1 4,331.0 3,999.8 4,248.3 4,645.7 4,567.2 4,466.0 4,447.7 2,176.3 2,046.3 Segment Operating Income Household Products 472.3 489.1 398.6 451.1 410.6 400.2 440.6 398.2 195.5 189.1 Personal Care 155.5 322.5 341.1 366.6 408.4 470.7 475.2 530.6 301.0 281.3 Total 627.8 811.6 739.7 817.7 819.0 870.9 915.8 928.8 496.5 470.4 Depreciation and Amortization Household Products 66.5 67.0 65.6 65.8 63.5 54.7 53.3 39.2 Personal Care 42.2 59.4 50.9 57.9 78.9 82.0 72.7 81.1 Total 108.7 126.4 116.5 123.7 142.4 136.7 126.0 120.3 Segment EBITDA Household Products 538.8 556.1 464.2 516.9 474.1 454.9 493.9 437.4 Personal Care 197.7 381.9 392.0 424.5 487.3 552.7 547.9 611.7 Total* 736.5 938.0 856.2 941.4 961.4 1,007.6 1,041.8 1,049.1 Segment Operating Margin Household Products 19.9% 19.8% 21.1% 20.5% 18.7% 19.2% 21.8% 21.7% 20.9% 22.0% Personal Care 15.7% 17.4% 16.2% 17.9% 16.7% 19.0% 19.4% 20.3% 24.3% 23.7% Total* 18.7% 18.7% 18.5% 19.2% 17.6% 19.1% 20.5% 20.9% 22.8% 23.0% Segment EBITDA Margin Household Products 22.7% 22.5% 24.6% 23.5% 21.6% 21.8% 24.5% 23.8% Personal Care 20.0% 20.6% 18.6% 20.7% 19.9% 22.3% 22.4% 23.4% Total* 21.9% 21.7% 21.4% 22.2% 20.7% 22.1% 23.3% 23.6%

Revenue Growth Household Products 4.1% -23.6% 16.4% -0.2% -4.9% -3.4% -9.0% -8.4% Personal Care 87.8% 13.6% -2.9% 19.6% 1.2% -1.2% 6.7% -4.1% Total 28.7% -7.6% 6.2% 9.4% -1.7% -2.2% -0.4% -6.0% Segment Operating Income Growth Household Products 3.6% -18.5% 13.2% -9.0% -2.5% 10.1% -9.6% -3.3% Personal Care 107.4% 5.8% 7.5% 11.4% 15.3% 1.0% 11.7% -6.5% Total* 29.3% -8.9% 10.5% 0.2% 6.3% 5.2% 1.4% -5.3% Segment EBITDA Growth Household Products 3.2% -16.5% 11.4% -8.3% -4.0% 8.6% -11.4% Personal Care 93.2% 2.6% 8.3% 14.8% 13.4% -0.9% 11.6% Total* 27.4% -8.7% 10.0% 2.1% 4.8% 3.4% 0.7% * Excludes general corporate expense. Source: Company reports, Bloomberg.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Personal Care Segment

Personal Care product sales are segmented into five categories: wet shave, feminine care, skin care, infant care, and other personal care products. The wet shave category, essentially any shaving method that is not done with an electric shaver, including preparations such as shaving creams and gels, accounts for almost 61% of segment sales, having increased at a 6.6% CAGR since 2008 (see Exhibit 3). Growth has primarily been fostered via acquisitions: Schick in 2003, Edge and Skintimate in 2009, and American Safety Razor in 2010. Absent acquisitions, wet shave sales have decreased in recent years due to lower sales of legacy branded shave systems and preparations, partially offset by increased sales from new product introductions such as Schick Hydro men’s shavers, Hydro Silk women’s system, and Hydro Disposable razors. Currency has generally been a greater hindrance to sales than the loss of internally generated sales. According to Nielsen data, ENR has the second largest market share in the wet shave category behind Gillette, a subsidiary of The Procter & Gamble Co. (NYSE: PG).

Exhibit 3 Personal Care Segment: Revenue by Product Category ($ in millions) F2014 F2008 F2009 F2010 F2011 F2012 F2013 F2014 1H F2014 1H F2015 Contribution Personal Care Wet Shave $ 1,085.0 $ 1,118.1 $ 1,265.1 $ 1,637.4 $ 1,687.6 $ 1,619.0 $ 1,591.5 $ 766.6 $ 715.8 60.9% Skin Care 364.1 364.0 383.0 417.6 423.0 429.0 424.5 186.2 184.5 16.3% Feminine Care 222.6 214.1 198.8 195.1 185.5 177.1 404.5 187.9 197.4 15.5% Infant Care 185.0 194.1 201.7 198.0 180.3 169.2 136.3 72.2 63.0 5.2% Other personal care products - 219.2 - 1.6 3.1 54.6 55.4 26.3 27.5 2.1% Total Revenue $ 1,856.7 $ 2,109.5 $ 2,048.6 $ 2,449.7 $ 2,479.5 $ 2,448.9 $ 2,612.2 $ 1,239.2 $ 1,188.2 Source: Company reports.

The market for shaving razors is estimated to total $3 billion, according to IBIS, with annual growth of 1.3% since 2009. ENR’s wet shave sales have been slowed by an influx of competitors and changes in grooming habits. While ENR and PG products continue to dominate in terms of market share, upstart operations such as Dollar Shave Club that offer monthly subscriptions for razors and blades at lower cost than brand-name incumbents have begun to carve out their own share of the market. According to Euromonitor, a market research firm, the wet shave category is expected to increase at 2% annually through 2016. ENR’s wet shave sales are concentrated in the U.S., Canada, Japan, and Germany.

Skin care represents 16.3% of segment sales, with annual growth of 2.6%. Brand names include Banana Boat and Hawaiian Tropic branded sun-care and suntan lotions. Skin care also includes Wet Ones, a moist hand wipe, and Playtex household gloves. Nielsen states that ENR’s sun and skin care products maintain the number one market share, with key geographies being the U.S., Mexico, and Australia. Euromonitor projects category growth of 4% annually through 2016.

Feminine care brands, which include Playtex, Stayfree, Carefree, and o.b., contribute 15.5% of sales and have experienced various levels of sales declines in F2008–F2013 (from -1.9% to - 7.1%) due to declining sales of legacy products, offset by newer products including Playtex Sport branded tampons, pads, liners, and combo packs. Sales more than doubled in F2014 due to the acquisition of Johnson & Johnson’s (NYSE: JNJ) feminine care product portfolio. Infant care

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT products include bottles, cups, and the Playtex Diaper Genie diaper disposal system, among others. Margins by product category are not disclosed.

Despite the weakness in sales (absent acquisitions) across the Personal Care segment, management has been diligent in maintaining cost controls to allow margin expansion. However, these improvements have been partially offset by the negative impact of currency. In 2014, segment profit from operations increased 7.7% (excluding acquisitions), while currency reduced profit by 5.2% versus the prior year. The year 2013 experienced a similar dynamic, with internal growth of 5.9% being offset by a 4.9% drag from currency. With approximately 50% of sales tied to international markets, and the current strength of the U.S. dollar, foreign exchange headwinds should be expected to persist.

New Energizer: Household Products Spin-Off

On April 30, 2014, Energizer Holdings Inc. announced plans to separate into two standalone publicly traded companies, a personal care and a household products company. Shares of the household products company, which will retain the Energizer Holdings Inc. name (“New Energizer”), will be distributed via a tax-free distribution of shares to ENR shareholders on July 1, 2015 before the market opens, to shareholders of record as of June 16, 2015. Shareholders of record will receive one share of New Energizer for every share of ENR held. The parent company will be rebranded Edgewell Personal Care (“Edgewell”) and will trade on the NYSE under the symbol “EPC”.

New Energizer reported pro forma revenue of $1.8 billion in F2014 and total segment profit of $340 million (see Exhibit 4). The company will report four segments based on geography: North America (includes Canada), Latin America (includes Mexico), EMEA (Europe, Middle East, and Asia), and Asia Pacific (includes Australia and New Zealand). International sales represent 55% of revenue, while alkaline batteries contribute 63% of company sales. Overall segment profit margin was 18.5% in 2014; however, North America and Asia Pacific have far wider margins, 29.0% and 27.7%, respectively, than Latin America and EMEA, at 16.3% and 14.7%. The margin differential can be attributed to a lack of critical scale in certain regions, which includes use of direct sales forces, as well as a local preference for private-label products (non-branded) in certain European markets, including Germany and France.

Total net sales declines of 8.5% in F2014 and 3.6% in F2013 were primarily the result of the loss of two retail customers within the U.S., Sam’s Club (subsidiary of Wal-Mart Stores Inc. [NYSE: WMT]) and Family Dollar Stores Inc. (NYSE: FDO), in 4Q F2013. Customer losses will be discussed in the “Outlook” section of this report. Currency headwinds have also negatively affected sales and profitability, especially in Latin America and Asia Pacific.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Exhibit 4 New Energizer: Pro Forma Historical Segment Results ($ in millions) F2012 F2013 F2014 1H F2014 1H F2015 Net Sales North America $ 1,103.4 $ 1,041.9 $ 909.2 $ 460.6 $ 421.0 Latin America 183.1 182.0 162.1 82.5 72.1 EMEA 431.6 423.3 419.1 225.7 205.1 Asia Pacific 369.6 365.0 350.0 173.2 160.0 Total Net Sales $ 2,087.7 $ 2,012.2 $ 1,840.4 $ 942.0 $ 858.2

Segment Profit North America $ 302.9 $ 307.1 $ 263.9 $ 123.3 $ 116.7 Latin America 32.3 32.9 26.4 13.1 10.0 EMEA 50.4 49.9 61.4 35.6 44.0 Asia Pacific 85.9 98.2 97.1 46.9 43.1 Corporate (145.1) (122.3) (108.5) (53.8) (57.1) Total Segment Profit $ 326.4 $ 365.8 $ 340.3 $ 165.1 $ 156.7

Depreciation and Amortization North America $ 31.7 $ 25.1 $ 17.6 Latin America 0.4 0.7 0.1 EMEA 1.2 1.4 0.6 Asia Pacific 21.4 26.2 20.9 Corporate 2.1 2.5 3.0 Total D&A $ 56.8 $ 55.9 $ 42.2

Segment EBITDA North America $ 334.6 $ 332.2 $ 281.5 Latin America 32.7 33.6 26.5 EMEA 51.6 51.3 62.0 Asia Pacific 107.3 124.4 118.0 Corporate (143.0) (119.8) (105.5) Total Segment EBITDA $ 383.2 $ 421.7 $ 382.5

Segment Profit Margins North America 27.5% 29.5% 29.0% 26.8% 27.7% Latin America 17.6% 18.1% 16.3% 15.9% 13.9% EMEA 11.7% 11.8% 14.7% 15.8% 21.5% Asia Pacific 23.2% 26.9% 27.7% 27.1% 26.9% Total (inc. Corporate) 15.6% 18.2% 18.5% 17.5% 18.3%

EBITDA Margin North America 30.3% 31.9% 31.0% Latin America 17.9% 18.5% 16.3% EMEA 12.0% 12.1% 14.8% Asia Pacific 29.0% 34.1% 33.7% Total (inc. Corporate) 18.4% 21.0% 20.8% Source: Company reports.

The household battery business is in a secular decline. ENR management states that the category as a whole is shrinking somewhere between 1% and 4% annually. The root cause can be attributed to changing technologies, primarily the increased use of multifunction electronics such as smart phones. The multipurpose functionality embedded in smart phones has significantly reduced demand for single-function electronics that require batteries from ENR and competitors (calculators, camcorders, digital cameras, etc.). While the market is declining, the rate of decay is slow, and there are still over 7 billion batteries sold annually across the world, 1 billion of which are sold in the U.S.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Compounding challenges from the declining market, there has been an increase in competition from, and consumer preference for, low-cost, unbranded, so-called private-label alternatives that provide virtually the same performance far more cheaply. A quick sampling from online retailers shows that standard Energizer AA batteries (Energizer MAX) cost roughly the same as Duracell; low-cost competitor Rayovac’s batteries (subsidiary of Spectrum Brands Holdings Inc. [NYSE: SPB]) were between 10% and 20% cheaper, while non-brand-name products were, in some cases, less than 50% the cost of ENR’s. In an attempt to differentiate its products from competitors, ENR has introduced versions of batteries that have increased power (Energizer Ultimate Lithium and Energizer Advanced Lithium), more eco-friendly products (Energizer EcoAdvanced), and rechargeable batteries, which are priced at a premium. Competitors have introduced largely similar “enhanced” products.

Given the shrinking size of the addressable market and increased low-cost competition, a focus on profitability has taken center stage. New Energizer’s EBITDA margins have widened modestly. In 2012 the company announced a multiyear restructuring program aimed at cost savings of $200 million. The cost savings were primarily focused on rationalizing manufacturing and packaging facilities related to the household products division through closures and streamlining. In 2014 the company increased its estimated annual savings from the program to $300 million. Since F2012, segment profit margins have increased 290 basis points to 18.5% in F2014.

Outlook

New Energizer

The battery business has two real competitors, Duracell and Rayovac, essentially making it an oligopoly. The category could be viewed as a zero-sum game in terms of pricing and volume. If one competitor were to slash prices, that company would likely gain market share at the expense of another competitor. At the same time, a price decrease would not likely increase actual consumption in the way a lower price for an item such as pizza would be expected to do. At best, some demand would be temporarily pulled forward; however, overall category sales would likely remain the same.

In recent years, Procter & Gamble took several competitive steps to increase market share across the company’s product portfolio, including with Duracell, but these steps ended up having a negative impact on Energizer’s sales. The most notable move was in 2013 when Procter &

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Gamble struck a deal with Sam’s Club to become the exclusive supplier of batteries, pushing out the then-exclusive Energizer brand. A similar outcome occurred at Family Dollar. Duracell is to be acquired by Berkshire Hathaway Inc. (NYSE: BRK-A, BRK-B) at the end of June 2015. Berkshire has historically managed its owned businesses to maximize cash flow, suggesting that an aggressive pricing strategy for Duracell products under the new ownership is not likely. A return of the category to a more normalized pricing environment, or potentially an inflationary one, should benefit New Energizer’s free cash flow margin.

Management has stated that New Energizer will focus on generating free cash flow. New Energizer has significantly improved its working capital, and looks to increase the use of exclusive and non-exclusive distributors in foreign countries, which should reduce costs compared to the direct sales force employed throughout most of the company’s current markets despite the distributor model’s lower margins. The company also plans to exit a small number of non-core markets, which management states do not significantly contribute to sales and operate at either a loss or a low-margin profit. Working capital as a percentage of sales has decreased to 12.7% in F2014, versus 22.9% in F2011. Over the past three years, the company has generated on average $250 million in free cash flow per year (see Exhibit 5). With working capital improvements likely to be below the levels of prior years, normalized free cash flow also will likely be below the historic average.

Exhibit 5 New Energizer: Historical Free Cash Flow Generation ($ in millions) F2012 F2013 F2014 1H F2014 1H F2015 Net Income $ 187.0 $ 114.9 $ 157.3 $ 74.5 $ (7.5) Changes in Working Capital (17.0) (56.1) (16.1) (20.4) (16.6) Operating Cash Flow 285.3 329.6 219.9 133.4 126.9 Capital Expenditures (38.1) (17.8) (28.4) (14.2) (18.0) Free Cash Flow $ 247.2 $ 311.8 $ 191.5 $ 119.2 $ 108.9 Source: Company reports.

The primary use of free cash flow will be to invest in brand building through advertising and promotional spending, and a return of capital to shareholders. Management has stated that it is also open to selective M&A activity. Since F2012, advertising and promotion spending has increased $11.9 million to $121.7 million in F2014, representing 6.6% of revenue versus 5.3% in F2012; revenue declined 12% over the same time period due to the above-mentioned customer losses. Concurrently, selling, general and administrative expenses have declined by $24.8 million. New Energizer plans to pay a regular quarterly dividend, equating to $1 per share annually. Upon separation, New Energizer will transfer $1 billion to the parent company, and will retain a $300 million in cash. The company is also putting in place a 7.5 million share repurchase program.

Edgewell Personal Care

The parent entity has outlined its strategy, which includes accelerating top-line growth, systemic cost reduction, and generating substantial free cash flow, in addition to conducting selected acquisitions. Long-term targets for revenue growth of 2%-3%, and operating margin improvement of 50 basis points per year, would result in high-single-digit EPS growth. Top-line

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT growth is to be supported by increased advertising and promotional (A&P) spending, new product innovation, and continued expansion in international markets. A&P spending totaled 14.2% of sales in F2014, an increase from 13.7% in F2012; F2015 spending will increase slightly and will focus on supporting new products. Recent product introductions have come across the portfolio and have incorporated product features from recent acquisitions in existing products, including the rollout of Playtex SPORT tampons, pads, and liners, as well as the introduction of combo packs of the SPORT products. New Banana Boat and Hawaiian Tropic sun-care products that combine moisturizers and less adhesion to sand have also been introduced recently.

Opportunities also exist for the company to further expand in non-core markets. As a point of reference, international sales of sun-care products are 29% of EPC’s sun-care sales; however, international sales have grown at a 15.3% CAGR since F2008, well outpacing the 4% growth rate for EPC’s overall sun-care business over the same time period. A similar opportunity appears to exist for sales of wet shave products. The global category is growing at 2% annually, with the U.S. market expanding at only 1%. EPC’s wet shave sales are primarily derived from North America (45%), with Latin America representing only 8% of wet shave sales. According to GCI Magazine, a publication focused on marketing and brand managers, the fastest-growing market for men’s grooming products is Brazil.

Cost cutting has primarily focused on two areas: reducing and upgrading the company’s global manufacturing footprint, and reducing working capital requirements. The company closed two plants, located in Montreal and Brazil, while improving processes and implementing automation at its Connecticut and Germany facilities. At the same time, production was shifted to lower-cost plants, including China and Mexico. Plant rationalization has been key to margin expansion, F2014 personal care segment margins were 20.3% (excluding corporate costs), an increase from 16.7% in F2011, while segment SG&A as a percentage of sales has decreased to 12.5% from 14.7% over the same time period. EPC expects to incur $30-$40 million in initial cost dis- synergies, of which $30-$35 million will be offset by SG&A savings by the end of F2015.

The improvements from working capital have primarily been focused on improvements in days of sales and payables outstanding. As a percentage of sales, working capital was 16.6% in F2014, versus 22.9% in F2011. Management believes that there are further opportunities to improve the inventory component of working capital.

Historical uses of free cash flow have been focused on acquisitions and share repurchases. Edgwell will continue with these priorities. ENR’s Board of Directors has authorized a 10 million share repurchase program that will transfer to Edgewell Personal Care.

It has been widely discussed in the financial press and investor community that the spin-off of New Energizer could position the parent entity, Edgewell Personal Care, to be acquired following the transaction. In what appears to be a response to such discussion, ENR adopted a short-term shareholders’ rights plan (poison pill) in May 2015. The plan, which expires on December 31, 2015, declared a special dividend of one preferred share purchase right for each share held by shareholders of record as of June 1, 2015. The rights are exercisable in the event of an entity acquiring 10% of the outstanding shares; as of the writing of this report, there is only

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT one active investor listed among the top holders that owns 4% of shares outstanding. Management stressed at its investor day in June that the rights program is short term in nature and was meant to prevent a change of control occurring at a time when Edgewell’s stock could be facing significant volatility following the spin.

New Energizer will make a $1 billion cash payment to Edgwell, which will carry approximately $800 million in net debt, with a weighted average interest rate of 4.0%.

In light of the previous discussion about the potential for both companies to be acquisition targets, the fact that ENR itself was a spun-off from Ralston Purina on April 1, 2000, could be analyzed to gain insight into the potential post-spin performance of New Energizer and Edgewell. Over the first six months of regular-way trading, ENR experienced significant underperformance versus the S&P 500, which reversed course as the shares eventually outpaced the index by almost 25% in the initial two years of trading (see Exhibit 6). The parent company also experienced initial underperformance before being acquired by Nestle S.A. on December 12, 2001, for $33.48 per share, representing a 57.6% increase over the first day of regular-way trading post the ENR spin-off. The S&P 500 declined 24.5% from the first day of regular way trading through the completion of the Ralston purchase.

Exhibit 6 Ralston Purina/Energizer Spin Price Performance Spin Parent S&P 1Week -2.96% -7.29% 1.21% 2 Week -3.77% -9.70% -9.44% 1 Month -26.68% -13.61% -1.95% 3 month -21.29% -0.94% -2.66% 6 month 5.66% 17.45% -3.60% 1 Year 7.82% 54.04% -21.68% 2 Year 1.39% 66.26% -21.55% Source: Bloomberg.

The margin performance of Ralston and Energizer is also relevant given that New Energizer is essentially the same company that was spun off in 2000. Following the spin, ENR’s gross and operating margin decreased significantly, in large part due to increased standalone corporate costs (see Exhibit 7). It is noteworthy that the company was able rather quickly to return margins to pre-spin levels, suggesting that both entities may experience short-term margin compression but that existing cost-control programs may be able to return margins to pre-spin levels in about a year’s time.

Exhibit 7 Ralston Purina/Energizer Spin-Off Margin Performance F1998 F1999 F2000 F2001 F2002 F2003 F2004 Ralston-Purina Gross Margin 50.6% 56.9% 59.3% 53.5% Operating Margin 15.4% 18.7% 20.1% 19.6%

Energizer Holdings Gross Margin 47.7% 46.7% 45.8% 41.0% 44.6% 46.9% 50.1% Operating Margin 15.3% 14.1% 16.8% 11.5% 17.7% 16.5% 14.4% Source: Bloomberg, company reports.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Valuation

New Energizer: Post Spin

Difficulty in deriving a peer group arises from the fact that there are only a few battery makers: primarily Duracell, which was recently sold to Berkshire Hathaway, and Rayovac, which is owned by Spectrum Brands Holdings (NYSE: SPB). Compounding the issue of a limited number of battery competitors, those companies within the industry have far wider breadth of products in their portfolios. Batteries represent only 22% of the Spectrum Brands revenues, the balance from hardware and home improvement products, small appliances, pet supplies, home and garden products, and electric shaving/grooming/personal care products. Expanding the peer group slightly, Jarden Corp. (NYSE: JAH) could be included, given that the company has a large focus on consumer brands, including household items and outdoor solutions, similar to ENR’s exposure with batteries and lighting solutions, although it has a much more diverse product base. (see Exhibit 8).

Exhibit 8 Energizer Holdings Inc.: Peer Comparables ($ in millions, except per share data; shares in millions) Estee Reckitt Energizer Spectrum Procter Kimberly- Colgate- Lauder Church Henkel Benckiser Holdings Brands Jarden & Gamble Clark Palmolive Cos & Dwight Unilever AG & Co Group Inc Holdings Corp Co/The Corp Co Inc/The Co Inc NV KGaA PLC Ticker ENR SPB JAH PG KMB CL EL CHD UNA NA HEN3 GR RB/ LN

Price (6/8/2015) $ 136.42 $ 96.12 $ 52.94 $ 77.71 $ 105.48 $ 65.34 $ 87.53 $ 82.60 $ 36.84 $ 105.00 $ 5,678.00 Shares Out 62.2 53.3 192.5 2,713.0 364.1 904.6 378.4 130.6 430.6 Market Capitalization 8,483.8 5,642.6 10,194.4 210,826.9 38,405.2 59,104.6 33,121.2 10,810.2 112,082.2 41,873.1 40,500.5 Net Debt (Cash) 1,317.9 3,332.0 4,285.9 21,012.0 7,435.0 5,548.0 37.6 927.1 10,439.0 (171.0) 1,656.0 EV 9,801.7 8,974.6 14,480.3 231,838.9 45,840.2 64,652.6 33,158.8 11,737.3 122,521.2 41,702.1 42,156.5 Revenue 2014E 4,447.7 4,429.1 8,287.1 83,062.0 19,724.0 17,277.0 10,968.8 3,297.6 48,436.0 16,428.0 8,836.0 Revenue 2015E 4,176.1 4,647.3 8,279.4 76,364.7 18,822.5 16,501.1 10,841.3 3,391.7 53,649.9 18,068.0 9,019.5 Revenue 2016E 4,167.4 4,994.9 8,579.1 76,345.4 19,376.8 17,279.5 11,404.4 3,507.4 56,105.8 18,825.1 9,431.2 EBITDA 2014 731.2 639.6 830.9 18,429.0 3,383.0 3,999.0 2,212.2 732.4 8,452.0 2,660.0 2,346.0 2015E 843.0 779.3 1,174.4 18,058.8 4,068.4 4,577.0 1,990.5 780.6 9,229.6 3,286.2 2,423.6 2016E 854.9 879.5 1,278.0 18,550.1 4,294.4 4,879.8 2,288.3 826.5 9,821.7 3,518.2 2,585.3 EV/Sales ttm 2.3x 1.8x 1.7x 3.1x 2.3x 4.0x 2.9x 3.6x 2.1x 2.4x 4.5x EV/Sales 2015E 2.3x 1.9x 1.7x 3.0x 2.4x 3.9x 3.1x 3.5x 2.3x 2.3x 4.7x EV/Sales 2016E 2.4x 1.8x 1.7x 3.0x 2.4x 3.7x 2.9x 3.3x 2.2x 2.2x 4.5x EV / EBITDA 2014 13.4x 14.0x 17.4x 12.6x 13.6x 16.2x 15.0x 16.0x 14.5x 15.7x 18.0x 2015E 11.6x 11.5x 12.3x 12.8x 11.3x 14.1x 16.7x 15.0x 13.3x 12.7x 17.4x average 11.9x 14.2x 2016E 11.5x 10.2x 11.3x 12.5x 10.7x 13.2x 14.5x 14.2x 12.5x 11.9x 16.3x average 10.8x 13.2x P/E 2014 19.3x 22.6x 20.2x 18.5x 19.1x 22.3x 28.7x 27.3x 23.0x 24.1x 25.2x P/E 2015E 19.7x 22.3x 18.9x 19.6x 18.4x 22.6x 31.5x 25.3x 20.0x 21.5x 23.6x average 20.6x 22.8x P/E 2016E 19.4x 19.6x 16.7x 18.6x 17.1x 20.7x 26.4x 23.1x 18.6x 19.8x 22.0x average 18.2x 20.8x ROA 2014 5.2% 3.8% 2.3% 8.2% 8.9% 16.0% 16.0% 9.6% 11.1% 8.1% 21.0% ROE 2014 14.3% 22.1% 9.4% 16.9% 54.6% 126.4% 33.7% 18.8% 36.9% 15.1% 49.0% Operating Margin ttm 8.3% 10.5% 6.6% 16.7% 12.8% 22.2% 16.0% 19.6% 14.5% 13.8% 24.7% EBITDA Margin 2014 16.4% 14.4% 10.0% 22.2% 17.2% 23.1% 20.2% 22.2% 17.4% 16.2% 26.6% Free Cash Flow Yield 4.0% 6.8% 3.7% 5.3% 3.4% 4.2% 3.9% 4.5% 3.3% 3.5% 4.7% average 5.2% 4.1% Dividend Yield 1.5% 1.3% 0.0% 3.3% 3.2% 2.8% 1.0% 1.5% 3.0% N/A 2.4% average 0.6% 2.5% Source: Company reports, Bloomberg.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT As a base case for valuing New Energizer following the spin, management’s commentary on current negative revenue and earnings impact can be used. Management has commented that revenue has totaled $1.8 billion over the past 12 months; in 2015, the company expects to encounter the following negatives: currency $95-$100 million, deconsolidation of Venezuela operations $21 million1, and $45-$50 million related to the change to using distributors in some markets versus a direct sales force. Through the first half of F2015, revenue has decreased 8.9%, which is approximately in line with the expected declines, implying roughly flat product sales. Assuming a flat sales trend continues through the remainder of the year before growth returns in F2016E, the company would generate F2016E revenue of $1.7 billion, implying 2% growth, assuming currency stabilizes. On a pro forma basis, New ENR generated 18.3% and 19.5% EBITDA margins in F2014 and 1H F2015, respectively, not including initial dis-synergies. Assuming annual dis-synergies of $45 million would result in a 16.8% EBITDA margin (based on 1H F2015), and EBITDA of $286 million. Applying SPB’s 10.2x multiple results in a fair value estimate of $35 per share (see Exhibit 9). Management states that it expects to offset those dis-synergies in three to four quarters following the spin. Assuming a complete offset, with margins of 18.8%, the fair value estimate increases to $41 per share. Margins of 18.8% appear reasonable considering slight margin expansion from F2014, yet below the level of 1H F2015 to account for the strong seasonality in 1Q.

Exhibit 9 New Energizer: Fair Value Estimate Based on F2016E EBITDA ($ in millions, except per share data; shares in millions) F2014 Revenue 1,840.4 Less: Currency 100.0 Venezuela 21.0 Distributors 50.0 F2015 Revenue 1,669.4 Growth 2.0% F2016E Revenue 1,702.8 EBITDA Margin 16.8% 18.8% EBITDA 286.1 320.1 Multiple 10.2x Enterprise Value 2,917.9 3,265.3 Net Debt 720.0 Market Capitalization 2,197.9 2,545.3 Shares Outstanding 62.2 FVE $ / Share $ 35.34 $ 40.93 Source: Company reports, Bloomberg, The Spin-Off Report estimates.

1 Prior to March 31, 2015, Energizer Holdings, the parent (“ParentCo”), included the results of its Venezuelan operations in its consolidated financial statements using the consolidation method of accounting. Venezuelan exchange control regulations have resulted in an other-than- temporary lack of exchangeability between the Venezuelan bolivar and U.S. dollar, and have restricted ParentCo’s Venezuelan operations’ ability to pay dividends and settle intercompany obligations. The severe currency controls imposed by the Venezuelan government have significantly limited New Energizer’s ability to realize the benefits from earnings of ParentCo’s Venezuelan operations and access the resulting liquidity provided by those earnings. We expect that this condition will continue for the foreseeable future. This lack of exchangeability has resulted in a lack of control over ParentCo’s Venezuelan subsidiaries for accounting purposes. Therefore, in accordance with Accounting Standards Codification 810 — Consolidation, ParentCo deconsolidated its Venezuelan subsidiaries on March 31, 2015, and began accounting for its investment in its Venezuelan operations using the cost method of accounting. Source: Company reports.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Given New Energizer’s focus on maximizing cash flow and returning capital to shareholders, investors can also consider valuation based on free cash flow and dividend yield. New ENR averaged approximately $250 million in free cash flow over the past three years. Increased costs and a temporary increase in working capital will depress FCF conversion. Management has targeted FCF at 10%-12% of sales. Based on F2016E sales, the company would generate free cash flow of $184-$221 million. If shares trade similarly to SPB, which yields 6.8% of free cash flow, New ENR’s fair value estimate would range between $44 and $52 per share (see Exhibit 10). However, as noted above, initial free cash flow conversion will be lower than long-term targets based on temporary dis-synergies, lowering net margins. Assuming conversion of 8%- 10% results in a fair value range of $35 to $44 per share.

Exhibit 10 New Energizer: Fair Value Estimate Based on Free Cash Flow ($ in millions, except per share data; shares in millions) F2016E Revenue $ 1,840.4 FCF Conversion 8.0% 10.0% 12.0% FCF 147.2 184.0 220.8 Yield 6.8% Market Capitalization 2,165.2 2,706.5 3,247.8 Shares Outstanding 62.2 FVE $ / Share $ 34.82 $ 43.52 $ 52.22 Source: Company reports, Bloomberg, The Spin-Off Report estimates.

The company will pay an annual dividend of $1 per share. Valuing New ENR by comparing it with SPB’s 1.3% dividend yield results in a fair value of $77 per share. However, SPB pays less than 25% of its free cash flow in dividend, instead using cash to make acquisitions to grow the company’s portfolio. New ENR will pay out approximately 75% of domestically generated cash flow. SPB had a 2014 ROE of 22%, so if that is a reliable result, the reinvestment of 75% of SPB’s income should produce an annualized 16% increase in book value. The higher percentage payout of free cash flow signals to investors a lack of reinvestment opportunities, and higher risk associated with maintaining the dividend payout in the event of an earnings decline. To compensate for the perceived risk to dividend safety and lack of reinvestment opportunities, investors will require a higher clearing yield to accept the payout ratio versus SPB. The S&P 500 currently yields 1.9%; if New ENR shares trade in line, this would imply a fair value of $52 per share, while at the $42 fair value estimate, the shares would yield 2.4% (see Exhibit 11). The $42 per share fair value estimate is based on an average of value derived from EV/EBITDA (with expanded margins) and free cash flow yield of 6.8% (assuming 10% FCF conversion).

Exhibit 11 New Energizer: Fair Value Estimate Based on Dividend Yield Annual Dividend / Share $1.00 Yield 2.37% 1.93% 1.30% FVE $ / Share $ 42.22 $ 51.81 $ 76.92 Source: Company reports, Bloomberg, The Spin-Off Report estimates.

Lastly, the recent purchase of Duracell by Berkshire can be considered for the purposes of comparison. BRK will exchange $4.7 billion in PG stock for the brand. It is estimated that the Duracell generates $2.0-$2.5 billion in annual sales, implying a purchase multiple of 2.0x-2.5x

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT EV/sales. Applying that multiple results in a fair value range of $46-$61 per share (see Exhibit 12).

Exhibit 12 New Energizer: Fair Value Estimate Based on Berkshire Duracell Purchase ($ in millions, except per share data; shares in millions) F2016E Revenue $ 1,840.4 Takeout Multiple 2.0x 2.5x Enterprise Value 3,607.18 4,508.98 Net Debt 720.0 Market Capitalization 2,887.18 3,788.98 Shares Outstanding 62.2 FVE $ / Share $ 46.43 $ 60.93 Source: Company reports, Bloomberg, The Spin-Off Report estimates.

The cash flow generation from the Energizer brand would be attractive to buyers, particularly financial suitors. If a financial suitor were to purchase New Energizer in a leveraged buyout, acceptable returns might be achieved even at a purchase price as high as $71 per share. As a test of the reasonableness of a value as high as $71 per share, one can model the potential future return in a leveraged buyout scenario. Assuming annual revenue declines 1% through F2021E, and the company is able to expand margins to 20.5% with minimal capital expense requirements, New Energizer could generate free cash flow for debt retirement of $72 - $97 million annually. Assuming a 14x EV/EBITDA purchase price, slightly above the BRK purchase for Duracell, a similar exit multiple, and 80% debt financing, a financial investor could generate an internal rate of return approaching 15% with a five-year investment time horizon (see Exhibit 13). Modifying assumptions would result in superior returns For example, if revenue were to maintain at F2016 levels, the rate would increase to 18.6%, while flat revenue and EBITDA margins of 21% in F2020-F2021 increase the IRR north of 20%. This is not to suggest that an LBO firm would be satisfied with an IRR of 15% to 20%, merely that the company’s cash flow generating capacity can demonstrably support a fair value of $71.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Exhibit 13 New Energizer: Fair Value Based on Leveraged Buyout Scenario ($ in millions) F2017E EBITDA $ 320.13 Purchase Multiple 14.0x Purchase Price $ 4,481.8 Entry 1/1/2017 $ (896.4) Exit 1/1/2021 $ 1,908.6 % Debt used 80% $ Debt used $ 3,585.4 IRR 20.8% $ Equity investment $ 896.4 Interest rate 5%

F2016E F2017E F2018E F2019E F2020E F2021E Revenue $ 1,702.8 $ 1,702.8 $ 1,702.8 $ 1,702.8 $ 1,702.8 $ 1,702.8 Rev growth 0.0% 0.0% 0.0% 0.0% 0.0%

EBITDA $ 320.1 $ 332.0 $ 349.1 $ 357.6 $ 357.6 EBITDA Margin 18.8% 19.5% 20.5% 21.0% 21.0%

Less: Interest Expense 179.3 173.49 168.80 163.47 157.78 Taxes 27% 38.0 42.8 48.7 52.4 53.9 Cap Ex 30.0 30.0 30.0 30.0 30.0

FCF available for debt 72.8 85.7 101.6 111.7 115.9

Opening Debt Balance 3,585.4 3,512.6 3,426.8 3,325.2 3,213.5 Ending Debt Balance 3,512.6 3,426.8 3,325.2 3,213.5 3,097.7

Estimated Valuation $ 4,481.8 $ 4,648.6 $ 4,887.0 $ 5,006.2 $ 5,006.2 Less: Debt 3,512.6 3,426.8 3,325.2 3,213.5 3,097.7

Implied Equity Value $ 969.2 $ 1,221.8 $ 1,561.8 $ 1,792.7 $ 1,908.6

Debt/EBITDA 11.0x 10.3x 9.5x 9.0x 8.7x

EBITDA-CapEX $ 290.13 $ 302.05 $ 319.07 $ 327.59 $ 327.59 FCF margin 17.0% 17.7% 18.7% 19.2% 19.2% Source: Company reports, Bloomberg, The Spin-Off Report estimates.

Edgewell Personal Care Co.

In valuing the parent company, to be renamed Edgewell Personal Care, the company’s operations can be compared to other large personal care companies including Procter & Gamble, Kimberly-Clark Corp. (NYSE: KMB), Colgate-Palmolive Co. (NYSE: CL), The Estee Lauder Co. Inc (NYSE: EL), and Church & Dwight Co. Inc. (NYSE: CHD), among others (see Exhibit 8).

As is the case with New Energizer, Edgewell in F2015 will see revenue and earnings headwinds relating to the deconsolidation of Venezuela ($30 million) and currency ($150 million). Additionally, EPC is attempting to sell its industrial blade business, which will reduce revenue by $45 million. On a pro forma basis, the company generated $2.4 billion in revenue and $471 million in segment EBITDA, when adjusted for the above-mentioned items and increased corporate costs/dis-synergies of $30-$40 million. Management expects to offset $30-$35 million of the dis-synergies by the end of F2016. After adjusting for the noted revenue constraints, organic sales could be forecast to grow a modest 2% annually. This assumes domestic trends

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT stabilize, while international becomes a larger contributor to earnings. Assuming the cost reductions offset increased costs, EPC would generate an EBITDA margin of 21.5%, or $534 million, in F2016E. A fair value estimate of $93 per share is derived when applying the peer multiple of 13.2x. However, a case can be made that given EPC’s leading brands (Playtex and Banana Boat, among others) international growth prospects, and successful track record of conducting accretive acquisitions, the shares should trade at the higher end of the peer group. Shares would be valued at $100 per share when applying a 14.3x multiple, in line with peers EL and CHD (see Exhibit 14).

Exhibit 14 Edgewell Personal Care: Fair Value Estimate Based on F2016E EBITDA ($ in millions, except per share data; shares in millions) F2014 Revenue $ 2,612.2 Less: Currency 150.0 Venezuela 30.0 Industrial 45.0 Adj. Revenue 2,387.2 Growth 2.0% F2016E Revenue 2,483.6 EBITDA Margin 21.5% EBITDA 534.0 Multiple 14.3x Enterprise Value 7,636.0 Net Debt 1,432.2 Market Capitalizaiton 6,203.8 Shares Outstanding 62.2 FVE $ / Share $ 99.76 Source: Company reports, Bloomberg, The Spin-Off Report estimates.

Across the peer group used in the above exercise, shares are trading at historically high multiples. Current forward valuations represent 11% - 49% premiums to the 10 year historical forward EV/EBITDA average, and are at or near the 10 year high. Of note, EL, CHD, and RB/ LN trade at 49%, 35%, and 37% premiums to respective historical averages. In that context, while initial trading in EPC could be expected to also garner a premium, in a normalized environment there would appear to be downside risk to the current valuation environment in the event of a reversion to the mean multiple. The 10 year average historical forward EV / EBITDA for the peer group is 11.0x. While it has been widely speculated in the financial press and investment industry that EPC will have a short lived independent life, the current inflated valuations presented by peers limits a significant premium being awarded in the event of a takeout by a strategic buyer.

Excluding the contribution to free cash flow from New Energizer, Edgewell has averaged $315 million a year in free cash flow generation (see Exhibit 15). Assuming that increased costs of $30-$40 million would lower F2015E free cash flow, it can be estimated that EPC would generate $275 million in FCF. Peers currently yield 4.3%, which if applied to EPC’s FCF generates a fair value estimate of $103 per share (see Exhibit 16).

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Exhibit 15 Edgewell Personal Care: Pro Forma Free Cash Flow Generation ($ in millions) Energizer Holdings Inc. F2012 F2013 F2014 Net Income $ 408.9 $ 407.0 $ 356.1 Operating Cash Flow 631.6 750.0 572.0 Capital Expenditures (91.7) (88.8) (76.2) Free Cash Flow $ 539.9 $ 661.2 $ 495.8

New Energizer F2012 F2013 F2014 Net Income $ 187.0 $ 114.9 $ 157.3 Operating Cash Flow 285.3 329.6 219.9 Capital Expenditures (38.1) (17.8) (28.4) Free Cash Flow $ 247.2 $ 311.8 $ 191.5

Edgewell Personal Care F2012 F2013 F2014 Net Income $ 221.9 $ 292.1 $ 198.8 Operating Cash Flow 346.3 420.4 352.1 Capital Expenditures (53.6) (71.0) (47.8) Free Cash Flow $ 292.7 $ 349.4 $ 304.3 Source: Company reports, Bloomberg.

Exhibit 16 Edgewell Personal Care: Fair Value Estimate Based on FCF ($ in millions, except per share data; shares in millions)

FCF $ 275.0 Yield 4.3% Market Capitalization 6,395.3 Shares Outstanding 62.2 FVE $ / Share $ 102.84 Source: Company reports, Bloomberg, The Spin-Off Report estimates.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Conclusion

The separation makes sense from the point of view that the growth trajectory of the personal care business is opposite to that of the household products business. Personal care has opportunities for growth through increased penetration in international markets and via acquisition. The household products business, dominated by the sale of batteries, operates under the overhang of demand that is shrinking, albeit modestly, and it could be managed to maximize cash flow while maintaining market share and returning capital to shareholders. In this view, ENR’s separation can be compared to the recent wave of spin-offs conducted by media companies jettisoning their newspaper businesses, which were in the midst of a more pronounced secular decline, in favor of the growing television and broadcast businesses. The stagnant household products business has been a drag on the company’s valuation multiple as ENR shares have traded roughly in line with household product peers, which have traded at a discount between 20% and 30% versus personal care peers over the past five years. With personal care competitors trading at a premium to slower-growth household competitors, the separation should allow each company’s valuation multiple to be rerated. The obvious benefit of the rerating is that the personal care business, which has been the beneficiary of almost all of ENR’s acquisitions since becoming a public company in 2000, could lower its cost of capital for funding future transactions.

New Energizer, with its heavy exposure to consumer battery sales, has no pure-play public competitor, and has lost share in recent years due to competitive pricing from competitor Duracell. The Procter & Gamble Company (NYSE: PG) has entered into an agreement to sell the Duracell business to Warren Buffett’s Berkshire Hathaway Inc. (NSE: BRK-A, BRK-B). Under new stewardship, a normalization in industry pricing is likely to occur, given BRK’s history of managing businesses for cash flow versus market share. A reset of the competitive environment should slow sales losses for Energizer and improve cash flow generation. Based on peer comparables and cash flow generation, post-spin New Energizer can be fairly valued at $42 per share. The stable cash flow generation potential of the battery business could be an attractive asset to financial suitors down the road. Based on a leveraged buyout scenario, upside for New Energizer exists to $57 per share, although we note that a potential takeout is not likely to occur in the near term, in order to preserve the tax-free nature of the spin transaction.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT potential acquisition of Edgewell in the near term. Indeed, ENR was spun off from Ralston Purina in 2000, with the parent (Ralston) being acquired within approximately a year and a half after the transaction. Framed in that manner, Edgewell is probably awarded a premium multiple, which may explain ENR’s share price performance since the spin announcement. The shares have appreciated approximately 40% since the announcement, versus 16% for the S&P 500, implying that shares of Edgewell may already price in a takeout.

On a pre-spin basis, ENR can be valued at $144 per share, with upside to $158 based on a future takeout of New Energizer. Given the viewpoint that the current share price incorporates a takeout premium for Edgewell, shares of ENR are not recommended prior to the spin. Instead, investors should look for attractive entry points in New Energizer following the spin-off. As a point of reference, in the 2000 Ralston/Energizer spin-off, shares of ENR underperformed the S&P 500 over the first three months of regular-way trading, before significantly outperforming over the first two years of regular-way trading.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT

Exhibit 17 Energizer Holdings Inc.: Post-Spin Pro Forma Income Statement ($ in millions, except per share data; shares in millions) FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2014 MARCH 31, 2015 (dollar amounts in millions) Historical Pro Forma Pro Forma Historical Pro Forma Pro Forma New Separation for New Separation for Statement of Earnings Energizer Adjustments Separation Energizer Adjustments Separation Net sales $1,840.4 $ - $1,840.4 $ 858.2 $ - $ 858.2 Cost of products sold 990.0 - 990.0 455.9 - 455.9

Gross profit 850.4 - 850.4 402.3 - 402.3 Selling, general and administrative expense 391.3 (24.7) 366.6 214.3 (55.7) 158.6 Advertising and sales promotion expense 121.7 - 121.7 63.9 - 63.9 Research and development expense 25.3 - 25.3 12.6 - 12.6 Venezuela deconsolidation charge - - - 65.2 - 65.2 2013 restructuring 43.5 - 43.5 (9.3) - (9.3) Spin restructuring - - - 24.3 (24.3) - Interest expense 52.7 (4.7) 48.0 27.7 (3.7) 24.0 Other financing items, net 0.7 - 0.7 (6.1) - (6.1)

Earnings before income taxes 215.2 29.4 244.6 9.7 83.7 93.4 Income taxes 57.9 10.6 68.5 17.2 31.1 48.3

Net earnings $ 157.3 $ 18.8 $ 176.1 $ (7.5) $ 52.6 $ 45.1

Earnings Per Share Basic $ 2.84 $ 0.73 Diluted $ 2.84 $ 0.73 Weighted-Average Shares Outstanding Basic 62.0 62.1 Diluted 62.0 62.1 Source: Company reports.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 THE SPIN-OFF REPORT Exhibit 18 Energizer Holdings Inc.: Post-Spin Pro Forma Balance Sheet ($ in millions) AS OF MARCH 31, 2015 Historical Pro Forma Pro Forma New Separation for Energizer Adjustments Separation Assets Current assets Cash 90.1 209.9 300.0 Trade receivables, net 137.0 - 137.0 Inventories 271.6 - 271.6 Other current assets 127.0 - 127.0

Total current assets 625.7 209.9 835.6 Property, plant and equipment, net 217.3 - 217.3 Goodwill 38.0 - 38.0 Other intangible assets, net 78.0 - 78.0 Long term deferred tax asset 76.1 19.0 95.1 Other assets 34.5 15.8 50.3

Total assets 1,069.6 244.7 1,314.3

Liabilities and Equity Current liabilities Current maturities of long-term debt - - - Accounts payable 148.9 - 148.9 Other current liabilities 174.8 - 174.8

Total current liabilities 323.7 - 323.7 Long-term debt - 1,020.0 1,020.0 Other liabilities 79.1 55.9 135.0

Total liabilities 402.8 1,075.9 1,478.7

Equity Common stock - 0.6 0.6 Additional paid-in capital - (6.9) (6.9) Accumulated other comprehensive (loss)/income (73.6) (84.5) (158.1) Parent company investment 740.4 (740.4) -

Total equity 666.8 (831.2) (164.4)

Total liabilities and equity 1,069.6 244.7 1,314.3 Source: Company reports.

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 Horizon Kinetics LLC® 2015 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021