Figuring that the world will always want to shave unwanted body hair, brush its teeth and avoid bad breath and body-odor, the proposed purchase of Gillette by Procter & Gamble has so far been widely welcomed by the markets and one of the world's shrewdest investors, Warren Buffett.
As news sank in that the Cincinnati-based giant P&G, with a market value of US$140 billion, was prepared to pay US$57 billion for the Boston-based maker of Braun razors, Oral-B products and Duracell batteries, few analysts uttered even mild words of caution about the difficulty of integrating the companies into what will be a consumer-products behemoth.
"This combination of two best-in-class consumer products companies, at a time when they are both operating from strength, is a unique opportunity," said P&G CEO AG Lafley in a prepared statement on Friday. Although the deal will need regulatory approval, this is unlikely to be a problem because there is little overlap in the companies' products. P&G, which employs 110,000 in about 80 countries, already has 16 brands; its purchase of Gillette will add five more.
In welcoming the deal, they said that Gillette's male-orientated strength in razors, such as the Mach 3, and deodorants, such as Right Guard, are fine complements to P&G's stable of women's brands, including Olay lotions, Tampax, and Cover Girl and Max Factor cosmetics. At the same time, life will become more difficult for competitors such as Colgate-Palmolive. Its toothpastes will now have to compete with P&G's Crest and Gillette's Oral B toothbrushes. P&G-Gillette will also control Secret, Sure, Old Spice and Right Guard deodorants, versus the Speed Stick of Colgate.
On Friday, when news of the deal broke, analysts suggested it gives the green light to other consumer giants, such as Coca-Cola, to consider equally massive deals. It is taken as given that becoming as big as possible is the only way to maintain any power over retailers.
In the age of Wal-Mart, suppliers cannot be too big or too powerful.
"P&G is getting one of the `true crown jewels' in all of consumer products," says CIBC World Markets analyst Joseph Altobello.
"Besides creating what would be the pre-eminent consumer products company in the world, we believe it would underscore our thesis that suppliers need to either `get big or get focused' in order to maintain leverage in an industry marked by retailer consolidation."
In terms of sheer bulk, P&G-Gillette will be hard to beat: The combined company will have annual sales of US$60.7 billion. The world's number one foodmaker, Switzerland-based Nestle SA, has annual revenue of US$65.4 billion. Unilever, the world's largest food and soap manufacturer, has US$48.25 billion. For P&G's Lafley, the deal far surpasses his 2003 purchase of German hair-care products company Wella for US$6.9 billion.
In financial terms, the deal falls marginally short of being the largest merger in the past year. The first and second prize, respectively, in that contest go to French drugmaker Sanofi-Synthelabo's purchase of Aventis for US$72.7 billion a year ago, and JP Morgan Chase & Co's acquisition of Bank One Corp, for US$58 billion. But it comes in ahead of Cingular Wireless's purchase of AT&T Wireless Services (US$46.7 billion) and Sprint Corp's agreement to buy Nextel Communications for US$35 billion.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College