Report on takeover of Gillete by P&G
... markets like China, Russia, Mexico and Turkey. In addition to its thriving shaving blades and razors business, Gillette owns Duracell batteries and the Braun line of kitchen and personal appliances. Methods of finance This deal will be mainly paid for mainly in P&G shares. P&G is offering Gillette shareholders 0.975 of its shares for each Gillette share they hold, equal to an 18% premium on the closing price on 27th January. Share buyback: the offer values Gillette’s shares at about $54 a share. As well as issuing new shares to Gillette shareholders, P&G plans to spend between $18bn and $22bn buying back its own shares in the next year and half, which it said would have the same financial impact on its books as if the offer were 40% cash. The two firms expect to complete their merger in the autumn of 2005, subject to regulatory approval. The conglomerate of Gillette has been controlled by Warren Buffett, has long been Gillette’s largest shareholder. Consequences for the stakeholders Government: As both the companies are American, the American government has shown no objection on this merge. In fact some investors consider this as a dream deal and the two firms expect to complete their merger in their autumn of 2005. However this merge requires regulatory approval. The European Union’s competition commissioner Neelie Kroes is reviewing the merger as it might a huge monopoly even in countries outside the US. Competitors: Gillette and P&G will have an upper hand in competition due to their added financial muscle due to this merge. Gillette and P&G have a few products go together as a combination really well. For example Oral B toothbrush from Gillette and Crest toothpaste from P&G. Also P&G focuses on female grooming (Max factor, Olay) while Gillette’s focuses on male grooming. However the enemy is Unilever, which is the European version of P&G. They are currently the largest household goods maker, but after the merge they will be second. Unilever has annual sales of $45bn while P$G after the merge will have $60bn. At the same time, the merger could intensify the battles for market share between P&G and Gillette and such competitors as Colgate-Palmolive, Energizer holdings, and Rayovac. Employees: This deal will involve 6,000 job cuts, 4% of the combined workforce of 140,000. Despite being a US company, Procter and Gamble is a major employer in the UK, with 4,900 staff based in the UK and Ireland. Gillette employs 964 people in Reading and Isleworth. It is not clear how man...