P&G Gillette Merger

P&G-Gillette Introduction On January 28th 2005 P&G agreed to buy Gillette for $57bn (? 30). Gillette was the number 1 in razor accessories and proctor essay was number 1 in consumer products, a marriage of the best in their respective industries. The spinal fusion of the two companies created the worlds largest consumer products conglomerate. Gillette was a leader in its category of razors and batteries, merging with P&G provided it access to P&Gs technology and grocery storeplaceing skills.P&G added Gillette razors , Right fight back deodourant and Duracell batteries to its more than 300 consumer brands, including Ivory Soap, Head and Shoulders shampoo, Pringles, Crest toothpaste and Bounty paper towels. friendship Background P&G P&G a portion 500 company headquartered at down Cincinnati, Ohio. P&G is manufacturer of wide range of consumer products ranging from Ivory Soap, Head and Shoulders shampoo, Pringles, Crest toothpaste and Bounty paper towels. P&G reported revenue of $82. 6 one thousand million in 201.P&G was started in 1837 when William Proctor, a candlemaker, and James Gamble, a soapmaker, met in Cincinnati to become demarcation partners and Proctor and Gamble was born. In 18581859, sales reached $1million. By this point, approximately 80 employees worked for Procter & Gamble. In 1880, P&G discovered and marketed an inexpensive soap that floats on water called Ivory soap. William Arnett Procter, William Procters grandson, started a profit sharing program with the companys workforce in 1887. This program eliminated the chances of workers going to strike.Company opened legion(predicate) facilities to cover up the exponentially increasing demand. In 1920s and 1930s when radio because popular, PG sponsored a number of shows and soon the radio shows were know as soap operas. PG expanded into new countries in both areas manufacturing and product sales and with the acquisition of Thomas Hedley co. in 1930, PG became an international corporation. Large number of products and brand names were introduced over time, and PG branched come out into new areas. Tide, laundry detergent, and Prell shampoo was introduced by the company in 1946 and 1947 respectively.First toothpaste Crest containing fluoride was s previous(a) by PG in 1955. In 1957 company branched out again with the leveraging of Charmin Paper Mills and began manufacturing toilet paper and other paper products. Once again cerebrateing on laundry, Procter Gamble began making Downy fabric softener in 1960 and Bounce fabric softener sheets in 1972. Prior to 1960 Johnson and Johnson were manufacturing disposable diaper called Chrux but PG came out with one of the most revolutionary products on the market called Pampers, first test-marketed in 1961.Babies always wore cloth diapers, which were leaky and labour intensive to wash. Pampers provided a convenient alternative, albeit at the environ mental cost of more waste requiring landfilling. To turn its product line and to increase profits PG acquired a number of companies. Some of the acquisitions included Folgers Coffee, Norwich Eaton Pharmaceuticals (the makers of Pepto-Bismol), Richardson-Vicks, Noxell (Noxzema), Shultons Old Spice, Max Factor, and the Iams Company.In 1994, P&G was in top headlines, the management was placed in an unusual position of testifying in front of court in engaging with interest rate derivatives which they were not much capable to downstairsstand and incurred huge losses from that leveraged position and later on they sued the Bankers trust for the fraud. In 1996, P&G was again in headlines as Food and Drug Administration approved a new Product developed by company called Olestra.As the brand was called Olean, it was a lower-calorie substitute for plentiful used in cooking potato chips and other snacks but during its development stage it was associated with anal leakage and gastrointestinal difficulties in humans. On 28th January 2005 Gillette was acquired by P&G, for ming the largest consumer goods company and placing Unilever into second place. This acquisition helped P&G to add new products into its product line that included brands such as Gillette razors, Duracell, Braun, and Oral-B.The European trades union and the Federal Trade Commission approved the acquisition, with conditions to a spinoff of certain overlapping brands. P&G agreed to sell its Spin Brush battery-operated electric soup-strainer trading to Church & Dwight. P&G also divested Rembrandt a Gillettes oral-care toothpaste line. Official merger took place on October 1, 2005. The deodorant brands Right Guard, Soft Dri, and Dry estimation and Liquid Paper, and Gillettes stationery division, Paper Mate was sold to Dial Corporation and Newell Rubbermaid respectively.In 2008, P&G branched into the record business with its sponsorship of Tag Records, as an endorsement for TAG Body Spray. Gillette Gillette, originally founded as American Safety Razor Company, is a world leader in me n grooming products as well as of women. It was founded by King Gillette who in 1895 came up with the idea of disposable razor after being frustrated by dulled old razors that required professional honing. He envisioned an inexpensive razor web combination where blade can be clamped on the razor and once acquiring dulled can be replaced.After six years of innovation and engineering finally in 1901 after joining hands with a MIT machinist, William Nickerson, American Safety Razor Corp was born. In 1903 company was renamed as Gillette. Company paid the first cash dividend in 1906. Before First World contend Gillette expanded abroad opening in London, first sales office was opened, manufacturing plants in Paris, Montreal, Berlin, and Leicester, England, and offices in France and Hamburg, Germany. By 1923, Income from foreign operation accounted for 30% of the total income.In 1910, Owner and President King Gillette decide to sell a major portion of his stake to investor John Joyce. Jo yce was made the vice-president of the company. After his death in 1916 his friend, Edward Aldred, bought out the shares left to Joyce and took charge of the company. Gilletts patent on safety razor expired in 1921 and company was ready for new change. Gillette introduced the new improved razor at the old price, and used the old style razor, renamed the Silver Brownie razor at $1, to enter the low-priced end of the market.Gillette transformed into the razor blade model by giving away razor handles as premiums with other products, developing customers for the more profitable blades. Abroad expansion also continued. In 1922 Gillette became royal stag purveyor to the prince of Wales and in 1924 to King Gustav V of Sweden. Gillette came into top headlines when its Paris office gave Charles Lindbergh a Gillette Gold Traveler after he completed the first transatlantic flight. Company named Auto Strop Safety Razor, owned by Henry J.Gaisman, filed suit against Gillette for patent infringeme nt after Gillette produced a new blade using a continuous-strip process similar to one originally demonstrated to Gillette by Gaisman. Merging with Auto Strop solved the problem for Gillette but it gave birth to another problem. Gaisman check over the companys financial records and found out that Gillette had over-reported its earnings by $3 million for the past five. Stock price of Gillette fell from a high of $125 primeval in 1929 to $18 by end of decade. This led to the reorganization of Gillette.King Gillette resigned as nominal president and Gaisman became the new chairman of Gillette and Gerard B. lambert, son of the founder of the Lambert Pharmacal Company and a former manager there, came out of retirement to become president of Gillette. Gillette blatantly went to market and admitted the poor quality of its old blade and came up with a blade called blue blade made by continuous-strip process. Gillette entered into sports advertising and this lead to sharp increase in the sales. In 1942 sports events held by Gillette were called Gillette Cavalcade of Sports.In 1962 Gillette confront tuff competition from the English Wilkinson Sword Company as it started exporting the stainless steel blades to United States. Gillette also faced challenges from local player in stainless steel category and was left behind in the race. Gillette was left behind and latter it jumped into and developed a new blade but at that time it had lost its market share by 10%. By 1971 Gillette had four domestic divisions the Safety Razor Division the Toiletries Division, which featured Right Guard deodorant and antiperspirant the Personal Care Division and the Paper Mate division.In mid 1970s Gillette divested its business by selling off unprofitable business such as Buxton in 1977, Welcome Wagon in 1978, and Hyponex and the Autopoint mechanical pencil business in 1979 and pumping money into the core business. In 1986, Gillette was being engage by Ronald Perelman, who had previously taken over Revlon. He was about to make a tender offer for Gillette, Gillette responded by paying Revlon $558million in return for Revlon not making a tender offer. This exposed the Gillette vulnerability and it resulted in Gillette going with stand unflurried agreement with 10 different companies.Gillette had responded to various takeover threats by slap-up cost and thinning the workforce. Gillette also divested its weak operations and because of it gestate showed a jump by 24%. By 2004 Gillette had annual sales of $10. 5 billion and net income of $1. 7 billion. The Acquisition On January 28th 2005 PG announced the acquisition of Gillette. As per the deal, 0. 975 shares of PG common stock were change for each share of Gillette. It accounted for 18% premium to Gillette shareholders based on the closing share prices on January 27, 2005.However, the approval by the shareholders of both Gillette and PG was required. The merger was expected to get regulatory clearance by 2005. PG pl anned to buy back $18-22 billion of its common stock in more or less 18 months immediately after the merger. The structure of deal came out to be 60% stock and 40% cash, although on paper it was a pure stock-swap. The particular(a) 18% premium paid by PG for Gillettes stock looked like that it made 18% more difficult for the deal to pay dividends to stock holders. The problem was in buying back shares as P&G would have to borrow funds to finance this transaction.In light of this move, both the companies came under the scanner of credit agency for a possible downgrade. S&P considered all the rating for P&G under negative umbrella dupe based on the likelihood that the deal would cause P&G to increase its leverage. As of September 30, 2004, P&G had debts of $21. 4 billion and Gillette of $3. 1 billion. Synergies Gillette maintains 64 manufacturing facilities in 27 countries, and its products are sold in more than 200 countries and territories, with more than 60 percent of sales occ urring outside the United States.For P&G the acquisition of Gillette was an opportunity for P&G to add a masculine dimension to overwhelmingly female-biased portfolio. This seems to be a merger of exactly strategically fit companies who complement each other. It was combination of two best-in-class companies creating a stronger brand portfolio, opportunities for even more innovation, faster sales growth, and cost savings. The importance of economies of scale and focus as described by analyst, P&G had attempted to gain both with this acquisition.There was change in marketing sense as Gillette market was mostly towards men so P&G women dominated product category have showed steep learning curve in understanding the men marketing. It was boost to its product category and therefore enhancing the top line. Both the companies have presence in different part of globe made the deal a geographical fit. Gillette has strong presence in countries such as Brazil and in India, where P&G has been lagging behind Unilever. P&G has slight penetration and distribution in China, the Philippines and fast-growing Eastern European markets such as Russia and Poland.Diversification of Product Portfolio As there was little overlapping in Gillette and P&G business this helped P&G to broaden its product base and offer more products to men in its women dominated product category. score Now After five years of the deal, things havent gone the way as expected. The boost to the top line that was expected by P&G with acquisition of Gillette has been in doldrums. P&G has lost the Gillette top management talent as most of senior managers (with the notable exception of legitimate P&G Vice Chairman Ed Shirley) have left.P&Gs stock has lagged behind key competitors, including Colgate-Palmolive Co. and Unilever, beaten P&G 4 to 1 and 3 to 1, respectively, in the stock market. The recession has played against P&G decline in sales in Gillette products have become a fence of worry for P&G. P&G exe cutives and Gillette officials show an optimistic view on the deal they feel still a lot more is still to come. Gillette has helped P&G to transform in different ways that arent always obvious.PG has made aggressive moves in key markets such as Brazil and India a much stronger operation throughout Europe and an even stronger showing on U. S. retail shelves a ever growing investment which pass on increase the companies efficiency and help it to deliver the best with innovated products. The deal has indeed given both the companies significant advantages. Economies of scale have been brought in along with whatever cost cutting giving PG increase in revenue and income. But only time will tell if this union of plainly very compatible partners is truly a match made in heaven.Exhibits PG balance sheet Balance Sheet 29-Jun-11 29-Jun-10 29-Jun-09 29-Jun-06 Assets incumbent Assets hard currency And Cash Equivalents 2,768,000 2,879,000 4,781,000 6,693,000 Short Term Investments discharge Receivables 7,415,000 6,325,000 7,045,000 Inventory 7,379,000 6,384,000 6,880,000 Other Current Assets 4,408,000 3,194,000 3,199,000 Total Current Assets 21,970,000 18,782,000 21,905,000 Long Term Investments Property Plant and Equipment 21,293,000 19,244,000 19,462,000 Goodwill 57,562,000 54,012,000 56,512,000 nonphysical Assets 32,620,000 31,636,000 32,606,000 Accumulated Amortization Other Assets 4,909,000 4,498,000 4,348,000 Deferred Long Term Asset Charges Total Assets 138,354,000 128,172,000 134,833,000 Liabilities Current Liabilities Accounts Payable 17,312,000 15,810,000 14,581,000 Short/Current Long Term Debt 9,981,000 8,472,000 16,320,000 Other Current Liabilities 7,768,000 Total Current Liabilities 27,293,000 24,282,000 30,901,000 Long Term Debt 22,033,000 21,360,000 20,652,000 Other Liabilities 9,957,000 10,189,000 9,146,000 Deferred Long Term Liability Charges 11,070,000 10,902,000 10, 752,000 Minority Interest 361,000 324,000 283,000 Negative Goodwill Total Liabilities 70,714,000 67,057,000 71,734,000 stockholders Equity Misc Stocks Options Warrants redeemable Preferred Stock Preferred Stock 1,234,000 1,277,000 1,324,000 Common Stock 4,008,000 4,008,000 4,007,000 Retained Earnings 70,682,000 64,614,000 57,309,000 Treasury Stock -6. E+07 -6. 1E+07 -5. 6E+07 Capital Surplus 62,405,000 61,697,000 61,118,000 Other Stockholder Equity -3411000 -9172000 -4698000 Total Stockholder Equity 68,001,000 61,439,000 63,382,000 Net Tangible Assets -2. 2E+07 -2. 4E+07 -2. 6E+07 P&G Income statement FINANCIAL SUMMARY (UNAUDITED) Amounts 2006 2005 2004 2003 2002Net Sales $68,222 $56,741 $51,407 $43,377 $40,238 Operating Income 13,249 10,469 9,382 7,312 6,073 Net Earnings 8,684 6,923 6,156 4,788 3,910 Net Earnings Margin 12. 70% 12. 20% 12. 00% 11. 00% 9. 70% Basic Net Earnings Per part Common Share $ 2. 79 2. 7 2. 34 1. 8 1. 46 Di luted Net Earnings Per Common Share 2. 64 2. 53 2. 2 1. 7 1. 39 Dividends Per Common Share 1. 15 1. 03 0. 93 0. 82 0. 76