Gillette and P&G Acquistion Synergies

1. Boy meets Girl
Gillette and P&G Hook up Their Brands

2. Company Profiles

3. • On October 31, 1837, Procter & Gamble was born. (William Procter
and James Gamble).
• A multinational corporation headquartered in downtown Cincinnati,
Ohio and manufactures a wide range of consumer goods.
• P&G is a global manufacturer of consumer goods, including
household care, beauty care, health, baby and family care products.
• In 2011, P&G recorded $82.6 billion dollars in sales.
• In 2011, Fortune magazine ranked P&G at fifth place of the "World's
Most Admired Companies" list.
• Procter and Gamble is a tier one sponsor of the London's Olympic
Games 2012 and sponsors 150 Athletes.
Procter & Gamble
http://en.wikipedia.org/wiki/Procter_%26_Gamble

4. • The original Gillette Company was founded by King
Camp Gillette in 1901 as a safety razor manufacturer.
• The Gillette brand is synonymous with shaving and
personal care products.
• King Gillette sought protection of his fledgling business
for safety razors when he applied for the trademarks for
razors and razor blades, soap, and shaving brushes on
Wednesday, May 27, 1908.
Gillette
http://en.wikipedia.org/wiki/Gillette_(brand)

5. $57 Billion Deal
Procter & Gamble employs a workforce of 110,000 worldwide and has a market
capitalization of $141 billion. Gillette employs 29,400 employees worldwide and has
a market capitalization of $45 billion :-2005

6. • Merrill Lynch & Co. acted as financial advisor and
Cadwalader, Wickersham & Taft, LLP acted as legal
counsel to P&G.
• UBS and Goldman Sachs acted as financial advisor and
Davis, Polk & Wardwell acted as legal counsel to Gillette.

7. • The transaction was valued at approximately $57 billion
(USD) based on closing NYSE stock prices of Jan. 27,
2005.
• “On 27 May 2005, the Commission received a
notification of a proposed concentration pursuant to
Article 4 of Council Regulation (EC) No 139/2004 by
which the undertaking The Procter & Gamble Company
(P&G, USA) acquires within the meaning of Article
3(1)(b) of the Council Regulation control of the whole of
the undertaking The Gillette Company (Gillette, USA) by
way of purchase of shares.”
Commission of the
European communities
http://ec.europa.eu/competition/mergers/cases/decisions/m3732_20050715_20212_en.pdf

8. • CEO- P&G: A.G. Lafley and Gillette: Jim Kilts.
• The proposed concentration was effected through a merger between a
wholly-owned subsidiary of the Procter & Gamble Company,
Aquarium Acquisition Cooperation, formed for the purpose of the
contemplated merger, with the Gillette Company. As a result, Gillette
will continue as the surviving operating unit and will become a
wholly owned subsidiary of P&G. The operation consist in the
acquisition of sole control of Gillette.
• EXCHANGE RATIO- Each Gillette common share was converted
into the right to receive 0.975 shares of P&G common stock.
Valuing the stock at $53.94 -- a premium of about 18 percent.
The Concentration

9. • The offer valued Gillette's shares at about $54 a share.
• Gillette shares held in the BuyDIRECT Plan, including
dividend reinvestment shares, are being automatically
converted into the P&G Shareholder Investment Program
(“SIP”) at the 0.975 rate, with resulting fractional shares
credited to P&G SIP accounts.
• Gillette shares held in the Direct Registration System
(“DRS”) are being automatically converted into whole
shares of P&G common stock in DRS form.
Exchange of Gillette
Shares

12. Responses

13. • Shareholders of both companies overwhelmingly
approved P&G's acquisition of Gillette that would form
the world's largest consumer products company, with
such brands as P&G's Pampers and Gillette's line of
razors. In announcements at separate special meetings,
the companies said 96 percent of the shares that were
voted favored the merger.
• News of the deal sent Gillette’s shares soaring $5.49, or
12 percent, to $51.17 in very heavy trading midday
Friday on the New York Stock Exchange, while P&G’s
fell $1.50, or 2.7 percent, to $53.82 also on the NYSE.
• Skeptical Wal-Mart – Negotiation power with Procter.
• P&G and Gillette would have 21 brands with more than
$1 billion in annual sales each.

14. • On Wall Street, shares in Gillette closed up nearly 13% on
Friday, while P&G slid 2.1%.
• Involved 6,000 job cuts, 4% of the combined workforce of
140,000. Company expected to reap $14 Billion in cost
savings.
• Mr. Buffett owns about 33% of Berkshire Hathaway which in
part owns 10% of Gillette. And at the end of the merger, he
would be receiving 93million shares of the new company.
• Regulatory Concerns: P&G’s focus on more valuable brands
has led to it shedding a number of ailing lines. It has sold off
Sunny Delight, Sure deodorant and several detergents, and
there is speculation that Lafley will soon dispose of
underperforming brands from the Gillette business.
Adjustments

15. ROE-2010

16. • Most of Gillette's senior managers (with the notable exception of current
P&G Vice Chairman Ed Shirley) have left.
• P&G's stock has lagged behind key competitors', including Colgate-
Palmolive Co. and Unilever.
• The recession buffeted Gillette's core business -- pricey razors and
blades.
• P&G's stock is up 12% since the day before the deal was announced in
2005. That's better than the S&P 500, down 8% over the same period.
But it's worse than two of the three competitors most directly affected by
the deal, including Colgate-Palmolive Co. (up 53%) and Unilever (up
36%).
• Privately at least, some veteran P&Gers looked down on the marketing
skill set of the incoming Gillette people. Some of the incoming Gillette
people found the P&Gers remarkably resistant to new ideas.
Did the deal pay off??

17. • XXL
• P&G’s triumph- Gillette
Fusion system razor.
• Gillette is strong in countries
such as Brazil and in India,
where P&G has always been
outperformed by Unilever.
P&G has excellent penetration
and distribution in China, the
Philippines and fast-growing
Eastern European markets such
as Russia and Poland.
However….

18. Thank you