The Hindu : Business : P&G strikes $57 billion deal with Gillette

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Saturday, Jan 29, 2005

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P&G strikes $57 billion deal with Gillette

NEW YORK, JAN. 28. The Procter & Gamble Co. is buying shaver and battery maker Gillette Co. for $57 billion (euro43.8 billion) in a deal that would create the world's largest consumer-products company.

If regulators approve the deal announced early Friday, P&G will add Duracell battery, Right Guard deodorant and Gillette razors to its collection of more than 300 consumer brands, including Head and Shoulders shampoo, Pringles, Crest toothpaste and Bounty paper towels. The acquisition would vault P&G's sales to more than $60 billion (euro46 billion) annually.

Friday's deal is expected to help P&G and Gillette cut their combined costs but will also mean the elimination of about 6,000 jobs, which is about 4 per cent of the combined workforce of about 140,000, most of them by eliminating managerial overlaps and consolidating operations.

"We believe we can bring these companies together and create a juggernaut,'' Gillette Chief Executive James M. Kilts told analysts in a briefing on the deal on Friday.

Mr. Kilts, who has agreed to stay on for at least a year to lead the integration of Gillette with P&G, said the combination would provide Gillette with opportunities to sell their products in developing markets including China and East Europe.

Both companies' boards approved the deal on Thursday.

Famed investor Warren Buffett's vehicle, Berkshire Hathaway Inc., owns 9.7 per cent of Gillette, or about 96 million shares — a stake equivalent to 93.6 million P&G shares. Cincinnati-based P&G will pay 0.975 of P&G share for each share of Gillette. Based on P&G's closing price of $55.32 (euro42.47) per share on Thursday, the deal values Boston-based Gillette at about $54 (euro41.46) per share — an 18 per cent premium over its closing price. P&G also plans to buy back $18 billion to $22 billion of its stock during the next year to 18 months.

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