Colgate Starts Stock Buy-Back Plan : Makes Offer for 12 Million Shares; Seeks to Sell 3 Units
Colgate-Palmolive Co., making a long-awaited move to bolster its stock price, on Wednesday announced a tender offer for as much as 12 million shares of its common stock and said it will divest several businesses outside its core personal and household goods markets.
The tender offer, which begins today and expires Aug. 21, is for $29.50 per share and would cost the firm $354 million. The company said it might buy an additional 3 million shares later. That could mean a repurchase of as much as 18% of Colgate’s 82 million shares outstanding.
“We believe that the shares are undervalued at current market prices and that, as such, they represent an attractive investment for the company,” Reuben Mark, its president and chief executive, said in a statement.
Colgate shares, which have lately under-performed in the bull market of 1985, closed Wednesday at $27.875, down 75 cents, in trading on the New York Stock Exchange.
The company has been the focus of takeover speculation largely because of the announced interest of Sir James Goldsmith, the Anglo-French financier who recently won a takeover battle for Crown Zellerbach.
Many analysts, however, believe that any threat from Goldsmith to increase his ownership of Colgate is illusory. “We still haven’t seen a 13-D from him that says he owns more than 5%,” said James D. Dougherty, an analyst for F. Eberstadt & Co, referring to disclosure forms that the Securities and Exchange Commission requires of those holding 5% or more of a company.
$260 Million From Sales
In his statement, Mark said the company hopes to earn about $260 million after taxes from the sale of three major operations. These are the Bike Athletic and Etonic subsidiaries, which make athletic shoes and other sporting goods; Riviana Foods, except for its Hills pet food unit, which Colgate will keep, and portions of Kendall Co., including its Medasonics unit, its woven fabrics subsidiary and parts of its health-care operations.
Colgate holds a franchise on some of the most familiar names in kitchen and medicine cabinets, including Fab and Ajax detergents, Colgate and Ultra-Brite toothpastes and Palmolive and Irish Spring soaps. Although he called the divisions placed up for sale “soundly managed and profitable businesses,” Mark said that “these organizations are likely to achieve greater performance in association with organizations having more compatible strategic directions.”
For several years, Colgate-Palmolive has been divesting non-core or disappointing operations, including Helena Rubenstein Co., sold in 1980.
On Wall Street, investment analysts said they had anticipated both the company’s repurchase of shares and further divestitures.
“At long last, they’ve made a move explicitly directed at enhancing the values of their shares,” Dougherty said.
Colgate profits have recently been on a modest rebound after three years of decline that resulted largely from tough competition in the household goods markets. Net income was $153.2 million in 1984; the company’s highest profit level was $208.4 million in 1980. The company last week said its net income for the second quarter ended June 30 fell 7% to $50 million, or 61 cents per share, from the same period a year earlier.
COLGATE-PALMOLIVE AT A GLANCE
Colgate-Palmolive, based in New York, is an international manufacturer and distributor of consumer, health care and industrial products.
1984 1983 1982 In millions Revenue $4,910 $4,865 $4,888 Net Income* $54 $198 $197
* Does not include results of discontinued operations in 1980, 1979 and 1974. Contributions by industry segment in 1984
Sales Household and personal care
69% Food
10% Health care and industrial
16% Specialty consumer
5% Profits Household and personal care
55% Food
18%
Health care and industrial
13%
Specialty consumer
14%
