The Procter & Gamble (P&G)-Gillette Merger
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Case Details:
Case Code : BSTR159
Case Length : 19 Pages
Period : 2005
Organization : Gillette, Procter and Gamble
Pub Date : 2005
Teaching Note : Available
Countries : USA
Industry : FMCG
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"This combination of two best-in-class consumer products
companies, at a time when they are both operating from a position of strength,
is a unique opportunity."
- AG Lafley, Chief Executive Officer, P&G.1
"This marks the realization of an historic next phase of
great opportunity for Gillette and also for P&G. It brings together two
companies that are complementary in their strengths, cultures, and vision to
create the potential for superior sustainable growth."
- James M. Kilts, Chief Executive Officer, Gillette Co.
(Gillette).2
"This merger is going to create the greatest consumer
products company in the world. It's a dream deal."
- Warren E. Buffett, Chairman and CEO, Berkshire Hathaway
Inc., Gillette's largest shareholder.3
"Mergers that increase market share are generally
productive because they increase market share and reduce competition. We don't
think that the two companies combined will be any stronger, from a marketing
point of view, than the two companies would have been if they were kept
separate."
- Al Ries, Consultant, Ries & Ries Consulting, Georgia.4
P&G Gets the Razor Edge
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With Cincinnati-based P&G announcing its investment deal to acquire Boston-based
Gillette for $57 billion, the stage was set for it to become the world's largest
consumer products company with annual sales of $60.7 billion. The new company
would overtake Unilever, which had sales of $48.25 billion in 2003. After its
purchase of Gillette, P&G would have 21 billion-dollar brands with a market
capitalization of $200 billion.
In the past, Gillette had been considered as a company averse to mergers. Revlon
Inc. (Revlon) had attempted a hostile takeover of Gillette in 1986 but was not
successful.
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In 1999, P&G had approached it with a takeover proposal but Gillette had turned
down the offer.
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Therefore,
when Gillette's CEO, James M Kilts (Kilts), started merger talks in
November 2004, saying that the timing was ripe for such a move, it came
as a surprise to analysts. The price issue left the merger talks
deadlocked for a month. But later, A G Lafley (Lafley), CEO of P&G,
restarted the talks in January 2005.
Analysts said the merger was a brave move by Lafley who had led P&G
during difficult times after he joined the company in 2000. Lafley
changed the company's focus from household products to the fast growing
health and beauty products. The company bought hair care firm Clairol
from Bristol Myers Squibb in 2001 for $4.9 billion and German hair care
firm Wella AG (Wella) in 2003 for $7 billion. |
The Procter & Gamble (P&G)-Gillette Merger
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