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Procter & Gamble buys Gillette razor group for about 57 billion dollars in shares
Procter & Gamble announced a huge extension of its global household products empire in the form of acquisition of the Gillette razor group for about 57 billion dollars in shares. With the friendly deal, which is subject to approval from anti-trust regulators, Procter & Gamble adds a product range with a strong brand image among men to its wide portfolio of consumer items found in homes in many countries.
The terms, accepted by Gillette, imply a price premium of about 18 percent on the price of Gillette shares based on closing prices on Thursday.
"This merger is going to create the greatest consumer products company in the world," said Warren Buffett, chairman and CEO of Berkshire Hathaway Inc., Gillette's largest shareholder. "It's a dream deal."
Procter & Gamble said it expected the acquisition to generate benefits of scale totalling 14-16 billion dollars, but also said it was likely to cut the combined worforce of 140,000 by about 6,000 or four percent. Most of these job cuts would arise through elimination of management overlaps and consolidation of business support functions.
P&G, which is based in Cincinnati, Ohio, has about 110,000 employees in almost 80 countries around the world. Its brands include Pampers diapers, Tide laundry detergent, Pringles potato chips and Head et Shoulders shampoo.
Gillette built its global presence on razor blades and shaving products and now includes Duracell batteries, Braun electric shavers and hair care products; Oral Care dental care products as well as skin care products and deodorants. Based in Boston, Massachusetts, it has 32 manufacturing plants in 14 countries.
"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," said Procter & Gamble's chairman, president and chief executive A.G. Lafley.
Forbes gives P&G top ranking in its household and personal furnishings segment. The company made 5.81 billion dollars profit in 2004 and had assets worth 53.86 billion dollars. Gillette ranks Number Five and has a market capitalization of 45.52 billion dollars.
"Gillette and P&G have similar cultures and complementary core strengths in branding, innovation, scale and go-to-market capabilities, making it a terrific fit. We are pleased James M. Kilts, Gillette's chairman of the board, chief executive officer, and president will join P&G's Board of Directors and serve as P&G vice chairman - Gillette," Lafley said.
Procter & Gamble is to acquire all of Gillette's business, including manufacturing, technical and other facilities. Subject to regulatory approval, the deal is expected to close in the fall of 2005, P and G said in a statement.