P&G Acquisition Gillete

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DAVID P. STOWELL rP os t KEL183 Revised July 2007 The Best Deal GiIlette Could Get? Proctor & Gamble’s Acquisition of Gillette A Dream Deal op yo January 27, 2005, was an extraordinary day for Gillette’s James Kilts, the show-stopping turnaround expert known as the “Razor Boss of Boston.” Kilts, along with Proctor & Gamble chairman Alan Lafley, had just orchestrated a $57 billion acquisition of Gillette by P&G. The creation of the world’s largest consumer products company would end Kilts’s four-year tenure as CEO of Gillette and bring to a close Gillette’s 104-year history as an independent corporate titan in the Boston area. The deal also capped a series of courtships between Gillette and other companies that had waxed and waned at various points throughout Kilts’s stewardship of Gillette. But almost immediately after the transaction was announced, P&G and Gillette drew criticism from the media and the state of Massachusetts concerning the terms of the sale. Would this merger actually benefit shareholders, or was it principally a wealth creation vehicle for Kilts? No tC Proctor & Gamble was known for its consumer products like soap, shampoo, laundry detergent, and food and beverages, as well as products for health and beauty care.1 The company owned a portfolio of approximately 150 brands—ranging from Ace bleach to Zest soap— including some of the world’s most recognizable: Pampers, Tide, Folgers, Charmin, Crest, Olay, and Head & Shoulders.2 Gillette was best known for its razor business, but the company controlled two other brands—Oral-B toothbrushes and Duracell batteries—that produced at least $1 billion in annual revenue (see Exhibit 1). Whereas P&G was particularly skilled in marketing to women,3 Gillette’s core customer segment was men (with the memorable marketing tagline “The Best a Man Can Get”). Gillette

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