Procter & Gamble’s Acquisition of Gillette

Abstract

On January 28, 2005, P&G announced the largest acquisition in its history to buy Gillette in a $57 billion deal. The deal combined some of the world’s top brands. P&G was the largest consumer products company in the world. P&G products ranged from Crest toothpaste to Head & Shoulders shampoo. The major products of Gillette included its signature razors, Duracell batteries, Braun, and Oral-B brands dental care products. The merger created the largest consumer products company in the world. The deal gave P&G more control over shelf space at the nation’s retailers and grocers and real estate which was at premium. P&G added Duracell batteries, Right Guard deodorant, and Gillette razors to more than 300 consumer brands which included Ivory soap, Head & Shoulders shampoo, Pringles, Crest toothpaste, and Bounty paper towels. P&G paid 0.975 share of its common stock for each share of Gillette common stock. On the basis of the closing price of $55.32 per share on January 28, 2005, the deal valued Gillette at about $54 per share which represented an 18% premium over its closing price. With Gillette acquisition, P&G had 10 billion dollar brands in Beauty and Health and 12 billion dollar brands in Baby, Family and Household segments. P&G leveraged Gillette’s strong in store presence in channels and with customers where P&G brands are not fully developed such as home improvement channels. The cumulative returns were negative in the shorter time window period and positive in the longer time window period. The average net earnings margin in the post-merger period improved to 13.6% from 10.7% in the premerger period.