C.K.

PITHAWALLA INSTITUTE OF MANAGEMENT

Procter & Gambler Acquire Gillette

Prepared by : Mehul.B.Raval Enrl no : 107060592032 Submitted to : Mrs. Farzana Goriawala

Procter & Gambler

P&G home products Ltd was incorporated as 100% subsidiary of P&G USA based company Established in 1993 (divestment of Detergent) Chairman& CEO: John.G.Smale  it mainly deals in detergents business Other products are Pantene ProV, Head&Shoulders shampoo, Tide detergent, Ariel etc.

Gillette India Ltd

It is United states (Massachusetts) base FMCG Gillette India was launched in 1985 as Indian Shaving Products Ltd Later the name changed to Gillette India Ltd Chairman & CEO: James.M.Kilts It offers product like shaving creams, Gillette presto ready shaver , deodorants, shave gel, conditioners, after shave etc

Why Gillette
P&G was strong in women s personal care products while Gillette was in men s Gillette s stock had climbed 50% since 2003 on account of jump in profit on premium product P&G estimates that acquisition would add about 20% to P&G s sales & operating margin by 25% P&G expect cost saving $ 14-16 billions from combining back office.(R&D, Marketing ,Adds)

In 1999, P&G had approached Gillette with takeover proposal but Gillette had turned down the offer When P&G again approached Gillette in 2004 the company showed interest in the offer

The Deal
P&G would pay $ 0.975 for each share of Gillette, valuing the acquisition at 20% premium P&G agreed to pay Gillette 40% in cash & 60% in stock P&G also promised to buy back its shares worth $ 18-22 billion, over the next 12-18 months

Acquisition
P&G announced its decision to acquire Gillette for $ 57 billions. The deal made P&G world s largest company with annual sales of $ 60.7 billions overtaking Unilever which had sales of $ 48.25 It was the unique case of acquisition by an innovative company to expand its product line by acquiring another innovative company

Changes in Share price

News of the deal sent Gillette s share soaring $5.49 or 12% on $45.68 to $51.17 in very heavy trading midday on new York stock exchange While P&G s fell $1.50 or 2.7% on $55.32 to $53.82 also on the new York stock exchange

Future outlook
 There is some internal issues which lead conflict like the acquisition would result in around 6000 job cuts, equivalent to 4% of the two companies work force of 140000  The company would overcome the regulatory hurdles because the products were sold to different customers  Regulatory hurdles prevent US companies from expanding as it make them vulnerable to foreign competition

P&G OVERCOMING PROBLEMS

Even though P&G had faced so many problems their executive talent at top is successful to manage it Their management is sufficient enough to manage this massive cultural assimilation to bring success

P&G reported strong quarterly earnings including 12% jump in net income to $2.04 billion or 74% per share up from $1.8 billion and 65% per share in the same period after the deal P&G s sales increased 7%to $14.45 billion in the quarter Gillette also reported income of $475 million up from $416.

conclusion
P&G s decision of acquiring Gillette proved beneficial for both the companies Rather than worrying too much about what critics said P&G keep on moving with its decision and explore the growth and achieve the profit what they had expected and lead the market

THANK

YOU

THANK YOU