Sales Royalties: Listerine Mouthwash

An incredibly rare and unique royalty stream that earns from the global sales of Listerine Antiseptic mouthwash.

$561,000

closing price

Auction Closed

Top Bid: Robert M

The Theoretical IRR is a formulaic guideline based on an extrapolation of the normalized, historical earnings trend of the catalog. The Theoretical IRR is not a guarantee of future performance. It should be used for comparison purposes only. Each catalog has its own risk factors and the Theoretical IRR is not based upon a specific analysis of this catalog. Click here to view the basis for all Theoretical IRR calculations.

Historic royalty income is no indication of future royalty income. Future royalty income is dependent upon future sales and licensing revenue generated by the sound recordings or compositions associated with this listing.

Starting Price: $180,000
Bidding Increment: $1,500
Closing Price: $561,000
End Date: Jul 14, 2020, 3:12 PM MDT
Dollar Age: 139 Years
Last 12 Months' Royalties:

$32,040

Investment Term:

Perpetual (See Note Below)

Distributors:

Johnson & Johnson

Rights Included:

Sales Royalties (See Note Below)

Interests Included:

Royalty Holder (World)

First Distribution (paid 30 days from receipt): July 15, 2020
Distribution Frequency:

Monthly

Buyer Fees:

1% of closing price or $500 (whichever is greater)‡§

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Description

Up for bid is a very unique asset with a nearly 140-year earning history, generating monthly payments for the lifetime of the brand.

It’s an opportunity to collect royalty income derived from what has been called one of the most remarkable business transactions in U.S. business history. As the winning bidder, you’ll own a royalty interest in the gross global sales of Listerine Antiseptic mouthwash. 

LISTING HIGHLIGHTS:

  • 139-Year Dollar Age
  • Monthly Payments
  • Perpetual investment term, as long as Listerine is sold

FINANCIAL HIGHLIGHTS:

Annual earnings for this asset have remained remarkably consistent over the past 5 calendar years — averaging just over $30,000/year from 2015 to 2019. What’s more, looking at the last three years of monthly payments, there is a very low variance year to year. 

U.S. generated royalties are paid monthly, based on the prior months’ sales. Royalties from sales in all other countries are paid on a quarterly basis. 

As a result, you’ll notice a spike in payments in the first month of every quarter (January, April, July, and October) due to those quarterly foreign royalty payments.

ABOUT THE ASSET:

The history of Listerine brand royalties is one of contract law legend. 

In 1881, Dr. JJ Lawrence invented Listerine and licensed the secret formula to J.W. Lambert and Lambert Pharmaceutical Co., ultimately settling on a royalty based on the number of ounces sold, to be paid to him and his “heirs, executors, or assigns” for as long as Listerine was sold.

For the next 75 years, the Lawrence family collected these royalties, with the ownership stake splintering between various heirs, some of whom sold portions of their stake to additional owners (such as New York real estate broker John J. Reynolds, who acquired half of the share of these royalties from the Lawrence heirs in 1950). 

After Lambert Pharmaceutical merged with Warner-Hudnut in 1955, the newly merged management contested the $1.5 million a year they were paying in royalties in court… a case they famously lost in a decision that remains cited in contract law cases and classes today. 

As a result of this decision, the Listerine royalty payments will remain in force for the lifetime of the brand, paid to whoever owns a share. Today, those entities include not only the heirs of the Lawrence family, but also various pension funds, universities, hospitals, and multiple individuals. 

This is your chance to be part of this exclusive group. 

Key Drivers

Consumer Staple. The royalty interest being sold is derived from an 1881 agreement between the inventor of the Listerine formula and the original distributor of the Listerine product. The royalty agreement calls for a flat rate royalty based on the ounces of Listerine sold worldwide, for as long as Listerine is sold. 

According to Statista, Listerine is the leading mouthwash/dental rinse brand in the U.S., with 2018 sales of $354 million. That’s nearly twice that of the second-place brand.

It's important to take into consideration that this income stream will only continue to pay out for as long as the Listerine Antiseptic mouthwash is sold. 

Dollar Age. This asset has a Dollar Age of 139 years, with payments made consistently since 1881. A high Dollar Age like this suggests stability and longevity.

What’s more, this asset has already survived a landmark court case contesting this royalty payment. In 1959, a federal court ruled that Listerine’s distributor— Warner-Lambert Pharmaceutical—must continue to abide by the original 1881 royalty agreement despite the fact that Listerine’s formula had previously been made public. 

So unlike music royalties, the copyright for which lasts the lifetime of the last surviving author plus 70 years, these royalties will pay in perpetuity for as long as Listerine is sold. 

Monthly Payments. These sales royalties are calculated on the gross sales of Listerine Antiseptic and paid on a monthly basis (for U.S. sales) by Johnson & Johnson. This is something noteworthy to prospective investors, as you’ll continue to collect income from this asset each month.

WHAT IS BEING SOLD?

A royalty interest in gross sales of Listerine Antiseptic. The royalty interest is derived from an 1881 agreement between the inventor of the Listerine formula and the original distributor of the Listerine product. The royalty agreement calls for a flat rate royalty on each gross of Listerine sold worldwide, for as long as Listerine is sold. The agreement has been in effect since 1881, and in 1959 its perpetual nature was upheld in U.S. federal court.

About the Royalty Distributor

Johnson & Johnson is an American multinational corporation founded in 1886 that develops medical devices, pharmaceutical, and consumer packaged goods. The corporation includes some 250 subsidiary companies with operations in 60 countries and products sold in over 175 countries. Johnson & Johnson's brands include numerous household names of medications and first aid supplies, including the Listerine brand. 

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