P&G Shaves Gillette in $57 Billion Deal

28 January 2005

The planet's most powerful consumer goods advertiser became even more Herculean overnight.

In a surprise revelation Thursday evening Procter & Gamble announced it is to acquire The Gillette Company in a $57 billion (€43.74bn; £30.21bn) deal, paid for mainly in P&G shares.

Whooped Alan G Lafley, chairman of the P&G board (also president and chief executive, lest any should doubt who's running the show): "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."

Warren Buffet, investment emperor and America's second richest man (after Bill Gates), was equally delighted. As indeed he should, being Gillette's largest shareholder. "This deal is going to create the greatest consumer products company in the world," he gloated. "It's a dream deal."

But the deal is nearer to nightmare than dream for many employees of both companies. It will eradicate the jobs of four percent of the combined workforce - six thousand people in all.

But by investment criteria all's well. The melding will achieve cost savings of between $14bn and $16bn from economies of scale, job cuts and internal reorganisation. And the bloodletting will create a corporate colossus with twenty-one brands, each averaging annual sales of $1bn.

The product lines of both companies are complementary: P&G specialises in womens' cosmetics and skincare, while Gillette brands focus on male grooming .

Concurrent with announcement of the deal, P&G raised its annual sales growth target range by 2% and is now shooting for between 5% and 7%. The takeover will create faster sales growth, cost savings, a stronger brand portfolio, and more opportunities for innovation.

For starters, P&G aims to accelerate the rollout of Gillette brands in China, Russia, Mexico and Turkey.

Data sourced from BBC Online; additional content by WARC staff