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Procter &Gamble Acquisition of Gillette (Anna Duvall)

In 2005, Procter & Gamble Co. (P&G) publicized the strategic acquisition of the razor-giant Gillette. This acquisition would fuse the world’s two largest consumer product companies, and bump Unilever down to second place in the industry. The company’s combines would produce everything from Tide to Pampers and Head & Shoulders shampoo to Crest toothpaste. The two companies combined will produce annual revenues of $60 billion. This will allow the combined conglomerates to have greater pricing leverage with discount supermarkets and drug stores such as Wal-Mart but allow “P&G to tap into Gillette’s coveted expertise on men” (Abelson, 2005, para. 6). Both companies Executives say they believe they’ll both should be able to grow faster together than as two separate companies.

Response

It has been estimated that the merger would eliminate about 6,000 jobs from the collective work force of 140,000(about 4 percent). P&G agreed to pay 0. 975 of its shares for each share of Gillette’s, making the company worth about $54 per share (Isidore, 2005). The companies also announced an 18 month plan to purchase back $18-22 billion of P&G’s stock. It was stated by MSNBC, that upon approval by regulators, the transaction would be financed through about 60 % stock

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and 40 % cash (MSNBC,2008). Outcome Now, P&G is the 25th largest company in the United States in terms of revenue. The company is also the 18th largest in terms of profit. Stocks trade for $70 per share with a 1 year target estimate of $78. 46. Learn more about Tide Detergent mission statement

The company’s cash flow statement reveals an operating cash flow of $15. 40 billion and a free cash flow of $6. 93 billion. P&G has current operations in 80 countries and product sales in approximately 180 countries. Since the acquisition of Gillette, P&G has more than tripled shareholders equity and wealth (Yahoo Finance, 2008). Also learn Gillette SWOT Analysis

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