- The Washington Times - Thursday, January 27, 2005

CINCINNATI — Procter & Gamble Co. is preparing to buy razor and battery maker Gillette Co. for $57 billion in a stock deal that would create the world’s largest consumer-products company, a source familiar with the deal told the Associated Press yesterday.

If approved by regulators, the deal would couple Gillette’s Duracell batteries, Right Guard deodorant and razor brands with P&G;’s Tide detergent, Clairol and pantene hair products and Folgers coffee.

Gillette officials did not returns calls for comment, and P&G; spokeswoman Linda Ulrey said the company had no comment on the reports. The deal was to be announced this morning in New York.

The deal was initially reported online last night by the New York Times and the Wall Street Journal.

Citing executives, the Boston Globe reported in a story for today’s editions that the acquisition would lead to about 6,000 job cuts, or 4 percent of the companies’ combined work forces.

Adding Gillette to its portfolio would vault P&G; sales to more than $60 billion annually and allow it to surpass Europe’s Unilever PLC as the largest consumer-products company.

Shares of Cincinnati-based P&G; have risen nearly a third since 2003, as the company’s strong stable of global brands has powered consistent profits and sales growth. That rise has given the consumer-products behemoth plenty of stock currency to pursue acquisitions.

The transaction calls for Gillette shareholders to receive 0.975 shares of P&G; for each share of Gillette held, the source told AP on the condition of anonymity. The $54 value, based on yesterday’s P&G; closing price of $55.32, is 18 percent more than the value of a share of Boston-based Gillette, the source said.

Gillette shares closed at $45.85 yesterday on the New York Stock Exchange, just below the 52-week high of $45.90 they hit during the session.

Some stock options would vest when the deal is complete, increasing the number of P&G; shares included in the transaction, the source told AP.

P&G; released its quarterly earnings yesterday, a day earlier than planned.

The company reported another strong quarter, with a 12 percent rise in net income to $2.04 billion, or 74 cents per share, from $1.8 billion, or 65 cents per share, in the same period a year ago. P&G; also boosted its profit outlook for the current fiscal year.

Sales rose 7 percent, to $14.45 billion, from $13.2 billion in the comparable period.

P&G;, which makes skin products such as Noxema and Old Spice, has not yet competed in the battery or shaving markets.

The newspapers said former P&G; Chief Executive Officer Durk Jager had made an overture to buy Gillette in 2000, but was rebuffed. But last month, the Times said, Gillette CEO James Kilts approached P&G; for talks about a possible deal.

In its most recent quarter, Gillette reported income of $475 million, up from $416 million, as more consumers traded up to its pricier M3Power razor and the series of hurricanes in the South boosted battery sales. Gillette also sells Oral B dental-care products.

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