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New York City-based Carter-Wallace (NYSE: CAR) on Tuesday said it has entered definitive agreements for the sale of the company in a two-step transaction in which stockholders will receive $20.30 a share, subject to a closing tax adjustment.

The transaction involves a sale for $739 million in cash, less certain debt outstanding, of the company”s consumer products business to Princeton-based Church & Dwight (NYSE: CHD) and Armkel, a 50/50 joint venture between Church & Dwight and New York City”s Kelso & Company LP, a private equity group, and a sale for $408 million of the remaining health care business, by means of a merger, to a buying group comprised of Short Hills-based MedPointe Capital Partners, The Carlyle Group of Washington, D.C., and The Cypress Group.

On consummation of the merger, the aggregate consideration is estimated to be $1.12 billion, less corporate taxes to be paid on the sale of the consumer products business, estimated to be approximately $160 million. Each transaction is conditioned on the other.

In connection with the transactions, CPI Development, a private holding company that controls approximately 83% of the voting power of Carter-Wallace, has entered into an agreement to vote in favor of the transactions.

The asset sale and merger have been approved by the board of directors of each party to the agreements and is subject to certain conditions, including a financing condition for each buyer, various regulatory approvals, as well as the approval of Carter-Wallace stockholders and other conditions. The parties expect the transaction to close in the third quarter of 2001.

Under the terms of the agreement between Carter-Wallace, Church & Dwight and Kelso, Church & Dwight will acquire Carter-Wallace”s U.S. antiperspirant and pet care businesses for $128 million; and ArmKel will acquire the rest of Carter-Wallace”s domestic and international consumer products business for $611 million.

Commenting on the deal, Robert A. Davies, chairman and chief executive officer of Church & Dwight, said: “The transaction will create a nearly $500 million U.S. personal care business with strong market positions in oral care and antiperspirants, and leading positions in condoms and depilatories. An added benefit is that it creates a $250 million international business and provides a platform for expanded international growth.”

Under the terms of the ArmKel joint venture agreement with Kelso, Church & Dwight has a call option to acquire Kelso”s interest in ArmKel in three to five years after the closing, at fair market value subject to certain limits. If Church & Dwight does not exercise its call option, there are provisions for the sale of the assets after a certain period. The venture”s board will have equal representation from both sides, with Church & Dwight appointing the chairman.

Church & Dwight estimates its financing needs for the purchase of Carter-Wallace”s antiperspirant and pet care businesses and the initial capital contribution to ArmKel at approximately $240 million. In addition, as previously announced, Church & Dwight has $150 million of financing needs related to the USA Detergents transaction and existing debt, resulting in total financing requirements of $400 million. Church & Dwight has obtained a commitment letter from JPMorgan for a fully underwritten $500 million senior credit facility which will be syndicated in the bank and institutional markets.

The ArmKel venture will be financed with $229 million in equity contributions from Church & Dwight and Kelso and an additional $420 million in debt. ArmKel has obtained a commitment letter from JPMorgan and Deutsche Bank for $505 million to finance the debt portion of the joint venture balance sheet.

The transaction is subject to approval by Carter-Wallace stockholders and to regulatory approvals and other customary conditions, including the satisfaction of bank financing conditions at the closing date.

Simultaneous with this transaction, Carter-Wallace and its pharmaceutical business will merge into a newly-formed company set up by MedPointe Capital Partners, The Carlyle Group and The Cypress Group.

In the deal, MedPointe is acquiring Wallace Laboratories, Carter-Wallace”s pharmaceutical arm, and Wampole Laboratories, its diagnostics unit, as well as the rights to the Carter-Wallace name. MedPointe, Carlyle and Cypress will collectively invest approximately $275 million in the transaction. They were advised in the transaction by Bear, Stearns, Simpson Thacher & Bartlett and PricewaterhouseCoopers. Bear, Stearns has also provided a commitment for up to $225 million of senior bank debt.

“Carter-Wallace is a healthcare products company with a long history and strong assets,” said Anthony H. Wild, MedPointe”s chairman and CEO. “The job now is to capitalize on those assets through increased emphasis on sales and marketing, product development and licensing. We have a long road ahead of us, but we are confident that the Carter-Wallace healthcare business provides an excellent platform for growth.”

Wild, who will become chairman and CEO of the new company, is the former president of the global pharmaceutical sector of Warner-Lambert, where he had worldwide responsibility for the company”s pharmaceutical operations, including research and development. The other three MedPointe executives will serve as executive vice presidents in the new company, responsible for operations, administration and finance.

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