Copyright (c) 2005 Globe Newspaper Company
Published in The Boston Globe on 1/28/05


by Steve Bailey and Naomi Aoki, Globe Staff

Gillette Co., which grew from humble beginnings over a fish market on the Boston waterfront to dominate the world's shaving market, agreed to be acquired by the much larger Procter & Gamble Co. in a deal valued at about $57 billion, executives familiar with the transaction said last night.

The deal offering Gillette shareholders an 18 percent premium over yesterday's closing price is scheduled to be disclosed today in New York, and marks the latest in a series of signature Boston companies to be acquired by larger companies based elsewhere.Both companies declined to comment on the deal last night.

Executives said the deal would result in about 6,000 layoffs, or about 4 percent of the combined companies' workforce. The executives declined to detail where those reductions would come, although they said Gillette's huge South Boston manufacturing plant would be unaffected.

The company will continue to be called Procter & Gamble, be headquartered in Cincinnati, and be headed by P&G's chief executive, A.G. Lafley. Gillette's chief executive, James Kilts, will become a vice chairman and the only member of the Gillette board to join the Procter & Gamble board, said executives familiar with the deal.

Procter & Gamble has long coveted Gillette, seeing the Boston company's profitable world razor business as a natural extension of its many consumer products from Tide detergent to Crest toothpaste. P&G made a secret, unsolicited offer to buy Gillette five years ago, but was rebuffed. Smaller Colgate-Palmolive Co. was also mentioned as a Gillette partner over the last several years.

Both companies have been on a roll. Yesterday Procter & Gamble said its latest quarterly earnings rose by 12 percent, powered by volume growth and high prices, along with cost cutting and the strong dollar. The company also raised its earnings forecast for the year.

With top-selling brands including Mach3 and Venus razors for men and women, Gillette has long been the world's no. 1 shaving company. But in the late 1990s, the company began losing market share for many of its brands.When Kilts joined Gillette in 2001, he aimed to turn around the slumping giant. Kilts trimmed costs and increased advertising. In 2002, sales rose 5 percent to $8.45 billion. They rose again in 2003 to $9.25 billion. As of the end of September, sales were on track to rise another 10 percent last year.

Under Kilts' leadership, the company's stock has risen about 50 percent.Despite increased competition from rival Schick-Wilkinson Sword and its St. Louis parent Energizer Holdings Inc., Gillette still dominates the shaving market. But Schick performed a rare feat of one upsmanship last year, introducing Quattro, the world's first four-blade razor. Gillette quickly responded with M3Turbo, a razor with a pulsating handle designed to stand hairs on end for a closer shave, outselling Quattro and stealing its thunder.

Gillette has also increased its presence in women's shaving, bringing triple-blade shaving technology to the women's market with its Venus family of razors. Proving that what's good for the gander is good for the goose, the company plans to launch a vibrating version of the Venus called Venus Vibrance.

The deal will be an all-stock transaction, with Procter & Gamble offering 0.975 shares for every Gillette share. That would value Gillette shares at $53.94 each, based on P&G's closing price of $55.32. The transaction in expected to close in the next four to seven months. P&G's investment banker was Merrill Lynch & Co; Gillette was represented by Goldman Sachs and UBS.

Steve Bailey can be reached at bailey@globe.com or at 617-929-2902.
Naomi Aoki can be reached at naoki@globe.com.

Copyright (c) 2005 Globe Newspaper Company

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