P&G and Gillette together at last

Procter & Gamble’s US $57 billion purchase of Gillette has gone ahead following the approval of the US government.

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By  David Ingham Published  October 4, 2005

The US government has approved Procter & Gamble’s US $57 billion purchase of Gillette, asking for the disposal of just a handful of minor assets. The two product lines that will have to be sold are the Rembrandt teeth whitening products and Right Guard men’s deodorant business. Sales of the brands were worth $400 million last year, a fraction of the two companies’ combined sales of US $67 billion. “These are smaller brands and their divestiture would not affect the long-term success of the merger,” said Linda Ulrey, a P&G spokeswoman. European antitrust regulators earlier approved the acquisition, asking P&G to sell only SpinBrush, a battery powered toothbrush. P&G said it will also be looking to dispose of Gillette’s Soft & Dri and Dry Idea deodorant brands. The brands on sale are relatively modest in size, but are largely profitable and there should be no shortage of takers. Analysts had expected the merger to meet with little regulatory resistance, given the lack of overlap in the firms’ product lineups. Now that the union has been approved, a consumer products behemoth has been born. P&G already owned 16 brands that generate more than $1 billion in revenue annually and the merger with Gillette adds another five, including household names like Gillette, Duracell, Braun and Oral-B. Analysts have speculated that the merged company will be particularly focused on opportunities in emerging markets, such as China, India and Africa. P&G executives have said that developing countries will represent a $100 billion opportunity by 2010. The deal will almost certainly give P&G more leverage with supermarket chains, which have increasingly been trying to squeeze their suppliers on price. The new P&G will also have more power to negotiate discounts with TV and publishing firms. In 2004, P&G spent around $5.5 billion worldwide on advertising. As Retail News Middle East went to press, it was still unclear how the merger might impact the Middle East. Globally, P&G has confirmed that it plans to cut 6000 jobs, approximately 4% of a combined workforce of 140,000. The company is now in the process of sorting out who stays and who goes. “We have made a commitment that every Gillette employee will know his or her circumstances within 6 months or less of the closing,” said AG Lafley, chief executive of P&G. “In a lot of cases, it’s going to be less.”

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