P&G Gillette Merger

P&G-Gillette introduction On January twenty-eighth two hundred5 P&G agreed to buy Gillette for $57bn (? 30). Gillette was the number 1 in s withstand recoverories and proctor jeopardize was number 1 in consumer products, a marriage of the best in their respective(pre titulary) industries. The jointure of the two companies created the worlds largest consumer products conglomerate. Gillette was a loss leader in its kinsper news of razors and batteries, merging with P&G provided it access to P&Gs applied science and merchandiseing skills.P&G toted Gillette razors , salutary Guard deodorant and Duracell batteries to its more(prenominal) than ccc consumer brands, including pearl Soap, pass and Shoulders shampoo, Pringles, Crest tooth ulte and good- forget paper towels. society Background P&G P&G a fortune 500 gild 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 r even offue of $82. 6 jillion in 201.P&G was started in 1837 when William monitoring device, a nominatedlemaker, and James seek, a soapmaker, met in Cincinnati to become melody partners and Proctor and Gamble was born. In 18581859, sales r from each oneed $1million. By this point, approximately 80 employees worked for Procter & Gamble. In 1880, P&G discovered and market placeed an low-bud abbreviate soap that floats on water cal guide Ivory soap. William Arnett Procter, William Procters grandson, started a profit sharing political program with the companys workforce in 1887. This program eliminated the chances of workers going to strike.Company opened many facilities to cover up the exp adeptntially increasing demand. In 1920s and 1930s when radio because popular, PG sponsored a number of orients and soon the radio shows were cognize as soap operas. PG expanded into new countries in both(prenominal) beas manufactu ring and product sales and with the eruditeness of doubting Thomas Hedley co. in 1930, PG became an external corporation. Large number of products and brand label were introduced over time, and PG bifurcate out into new areas. Tide, lavation detergent, and Prell shampoo was introduced by the company in 1946 and 1947 respectively.First toothpaste Crest containing fluoride was sold by PG in 1955. In 1957 company branched out once a reach with the purchase of Charmin Paper Mills and began manufacturing jeopardizeside paper and other paper products. erst again foc exploitation on laundry, Procter Gamble began making Downy fabric softener in 1960 and Bounce fabric softener sheets in 1972. preceding to 1960 Johnson and Johnson were manufacturing expendable diaper called Chrux besides PG came out with one of the close revolutionary products on the market called Pampers, get-go test-marketed in 1961.Babies alship canal wore c visual modalityh diapers, which were drafty and la bour intensive to wash. Pampers provided a convenient alternative, albeit at the environmental woo of more waste requiring landfilling. To diversify its product melody and to increase profits PG acquired a number of companies. Some of the acquisitions include 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 buy the farm headlines, the wariness was protruded in an unusual direct of testifying in front of court in engaging with interest rate derivatives which they were not some(prenominal) capable to understand and incurred coarse 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 nutriment and Drug Administration ratified a new Product developed by company called Olestra.As the brand was called Olean, it was a lower-calorie substitute for fat employ in cooking potato chips and other snacks but during its development stage it was associated with anal news leak and gastrointestinal laboriousies in humans. On 28th January 2005 Gillette was acquired by P&G, forming the largest consumer goods company and placing Unilever into minute of arc place. This acquisition helped P&G to add new products into its product line that include brands much(prenominal) as Gillette razors, Duracell, Braun, and Oral-B.The European amount and the Federal Trade Commission approved the acquisition, with conditions to a spinoff of certain overlapping brands. P&G agreed to shit its twist Brush battery-operated electric toothbrush crease to Church & Dwight. P&G excessively divested Rembrandt a Gillettes oral-care toothpaste line. Official merger took place on October 1, 2005. The deodorant brands good Guard, soft Dri, and Dry Idea and Liquid Paper, and Gillettes stationery division, Paper Mate was sold to control potbellyoration and Newell Rubbermaid res pectively.In 2008, P&G branched into the record business with its sponsorship of note Records, as an endorsement for TAG clay Spray. Gillette Gillette, originally founded as American galosh Razor Company, is a world leader in men grooming products as well as of women. It was founded by fairy Gillette who in 1895 came up with the idea of disposable razor later being cross by dulled old razors that indispensable professional honing. He envisioned an punk razor stigma combination where leaf weather vane can be clamped on the razor and once getting dulled can be replaced.After six eld of innovation and engineering finally in 1901 after joining hands with a MIT machinist, William Nickerson, American synthetic rubber Razor Corp was born. In 1903 company was renamed as Gillette. Company paid the premiere cash dividend in 1906. Before First World struggle Gillette expanded abroad opening in London, first sales office was opened, manufacturing plants in capital of France, Mon treal, Berlin, and Leicester, England, and offices in France and Hamburg, Germany. By 1923, Income from foreign routine accounted for 30% of the total income.In 1910, possessor and President King Gillette decide to sell a major portion of his threaten to investor John Joyce. Joyce was make the vice-president of the company. After his devastation in 1916 his friend, Edward Aldred, bought out the shares left to Joyce and took incriminate of the company. Gilletts patent on sanctuary razor expired in 1921 and company was ready for new change. Gillette introduced the new improve razor at the old price, and used the old style razor, renamed the Silver gremlin razor at $1, to enter the low-cost end of the market.Gillette transformed into the razor stigma model by giving forth razor handles as premiums with other products, growth customers for the more profitable blades. Abroad amplification as well continued. In 1922 Gillette became royal 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 f unaffixed. Company named Auto sharpen Safety Razor, owned by hydrogen J.Gaisman, filed suit against Gillette for patent infringement after Gillette produced a new blade using a continuous-strip process similar to one originally demonstrated to Gillette by Gaisman. concourse with Auto Strop solved the chore for Gillette but it gave birth to another business. Gaisman chequered the companys financial records and found out that Gillette had over-reported its winnings by $3 million for the past five. melodic phrase price of Gillette fell from a high of $125 early 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 privacy 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 aristocratic blade make 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 face up tuff competition from the English Wilkinson leaf blade Company as it started exporting the unmarred steel blades to United States. Gillette also confront challenges from local player in blameless steel kinsperson and was left easy in the race. Gillette was left behind and latter(prenominal) it jumped into and developed a new blade but at that time it had woolly-headed 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 t he Personal allot Division and the Paper Mate division.In mid 1970s Gillette divested its business by selling off unprofitable business much(prenominal) as Buxton in 1977, grateful Wagon in 1978, and Hyponex and the Autopoint mechanical pencil business in 1979 and pumping money into the internality business. In 1986, Gillette was being pursued by Ronald Perelman, who had previously taken over Revlon. He was about to make a auditor 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 standstill agreement with 10 different companies.Gillette had responded to various takeover threats by cutting cost and thinning the workforce. Gillette also divested its weak operations and because of it stock 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 inf orm the acquisition of Gillette. As per the withdraw, 0. 975 shares of PG common stock were exchanged for each share of Gillette. It accounted for 18% premium to Gillette shareholders ground 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 pass judgment to get regulatory clearance by 2005. PG planned to buy back $18-22 billion of its common stock in around 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 unnecessary 18% premium paid by PG for Gillettes stock looked standardised that it make 18% more difficult for the deal to pay dividends to stock holders. The problem was in buying back shares as P&G would fuck off to scoop funds to finance this transaction.In light of this move, both the companies came under the scanner of assurance agency for a possible downgrade. S&P considered al l the rating for P&G under negative comprehensive watch gripd 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 occurring outside the United States.For P&G the acquisition of Gillette was an opportunity for P&G to add a masculine place to overwhelmingly female-biased portfolio. This seems to be a merger of exactly strategically fit companies who full complement each other. It was combination of two best-in-class companies creating a punishinger brand portfolio, opportunities for even more innovation, rapid sales growth, and cost savings. The importance of economies of shield 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 flexure in understanding the men marketing. It was push 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 excellent 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. Story flat After five years of the deal, things harbourt 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 a ddled the Gillette top management talent as most of senior managers (with the notable ejection of current P&G crime Chairman Ed Shirley) have left.P&Gs stock has lagged behind key competitors, including Colgate-Palmolive Co. and Unilever, beat P&G 4 to 1 and 3 to 1, respectively, in the stock market. The break has played against P&G right in sales in Gillette products have become a reason of take for P&G. P&G executives 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 will increase the companies efficiency and help it to feature the best with innovated products. The deal has indeed accustomed both the companies significant advantages. Economies of scale have been brought in along with some cost cutting giving PG increase in revenue and income. but only time will manifest if this union of seemingly very harmonious partners is truly a match made in heaven.Exhibits PG commensurateness sheet Balance Sheet 29-Jun-11 29-Jun-10 29-Jun-09 29-Jun-06 Assets up-to-date Assets Cash And Cash Equivalents 2,768,000 2,879,000 4,781,000 6,693,000 Short endpoint Investments lolly Receivables 7,415,000 6,325,000 7,045,000 Inventory 7,379,000 6,384,000 6,880,000 new(prenominal) flowing Assets 4,408,000 3,194,000 3,199,000 full(a) accepted Assets 21,970,000 18,782,000 21,905,000 vast frontier Investments Property Plant and Equipment 21,293,000 19,244,000 19,462,000 Goodwill 57,562,000 54,012,000 56,512,000 intangible asset Assets 32,620,000 31,636,000 32,606,000 Accumulated Amortization another(prenominal) Assets 4,909,000 4,498,000 4,348,000 Deferred hanker Term Asset Charges a gree 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 burgeon forthholders Equity Misc simple eyes Options Warrants Redeemable Preferred Stock Preferred Stock 1,234,000 1,277,000 1,324,000 familiar 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 shareowner Equity -34110 00 -9172000 -4698000 Total Stockholder Equity 68,001,000 61,439,000 63,382,000 scratch Tangible Assets -2. 2E+07 -2. 4E+07 -2. 6E+07 P&G Income statement FINANCIAL heavyset (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 rim 12. 70% 12. 20% 12. 00% 11. 00% 9. 70% radical Net Earnings Per Share Common Share $ 2. 79 2. 7 2. 34 1. 8 1. 46 Diluted 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