Procter & Gamble extends its personal-care portfolio and its trade-marketing muscle with its $57 billion purchase of The Gillette Co.
Gillette’s flagship shaving business and its Oral-B, Duracell and Braun appliance brands complement P&G’s health and beauty care brands including Crest, Olay and Tampax.
The combined portfolio will have 21 brands with sales of $1 billion or more, 16 from P&G and five from Gillette. Its brands will hold the No. 1 spot in product categories that account for 66% of the combine company’s total sales.
Gillette’s strength in men’s grooming (especially with flagship Gillette brand and Braun) complements P&G’s strength in women’s personal care; Gillette’s Oral-B complements P&G’s Crest.
Gillette President-CEO James Kilts becomes vice chairman-Gillette at P&G.
The acquisition “brings together two companies that are complementary in their strengths, cultures and vision to create the potential for superior sustainable growth,” said Kilts in a statement.
“Gillette and P&G have similar cultures and complementary core strengths in branding, innovation, scale and go-to-market capabilities, making it a terrific fit,” said P&G President-CEO A.G. Lafley in a statement.
Cincinnati-based P&G will swap 0.975 of its common stock for each common share of Boston-based Gillette. (P&G will buy back $18 to $22 billion of its own common stock over the next 12 to 18 months.) The deal is expected to close in fall 2005. P&G expects to save $14 billion to $16 billion a year through economies of scale.
P&G expects to cut 6,000 jobs (about 4% of the combined staff of 140,000), mostly in duplicated management and business-support jobs. P&G will maintain “a strong presence” in Boston.
With Gillette, P&G will aim for 5% to 7% annual growth—more ambitious than its previously announced target of 4% to 6%. P&G also plans to accelerate Gillette’s growth in emerging markets including China, Russia, Mexico and Turkey.
It’s too early to say how the merger will affect marketing agency assignments. Last year P&G consolidated two significant pieces of business in separate reviews: It split its $4 billion media-planning account between Starcom MediaVest and Carat in July; the work includes strategic planning for promotions and p.r. as well as media advertising.
An integrated marketing review for P&G’s 35 HBC brands split the business between The Integer Group, Arc Worldwide and Saatchi & Saatchi X (formerly ThompsonMurray and, like Arc, owned by Publicis). The work follows P&G’s new “holistic planning” strategy and combines promotions, in-store, direct marketing and account-specific work.
P&G spent $2.7 billion on measured media in 2003 and $2.4 billion through October 2004, per TNS Media Intelligence. Gillette spent $336 million in 2003 and $392 million through October 2004, TNS reports.
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