Consumer products giant Procter & Gamble Co. said Wednesday that it will acquire Tambrands Inc. and its Tampax tampon brand for $1.85 billion, expanding its worldwide marketing of feminine hygiene products.
Investors said Procter & Gamble’s acquisition would help the company accomplish key goals: boosting its stock and giving it more products to sell in expanding overseas markets.
“It’s part of Procter & Gamble’s strategy of brand extension in lesser-developed countries,” said William Bahl, partner at Bahl & Gaynor, a Cincinnati investment company that owns 1.6 million P&G; shares.
P&G; sells more than 300 products in 140 nations. The key to its success is savvy marketing of its powerful brand-name goods, including Tide laundry detergent, Bounty paper towels, Folgers coffee, Oil of Olay and Cover Girl cosmetics, Crest toothpaste, Scope mouthwash and Pampers disposable diapers.
Cincinnati-based P&G; said it bid $50 a share for Tambrands.
Tambrands, based in White Plains, N.Y., has manufactured Tampax tampons for more than 60 years and has 44% of the tampon market, the companies said. The company reported 1996 sales of $662 million.
Investors cheered the acquisition announcement. P&G;'s shares rose $4 to close at $119.75. Tambrands rose $2 to close at $48.125. Both trade on the New York Stock Exchange.
Procter & Gamble said it expects to reap about $100 million in annual savings within three years from the acquisition.
“There is certainly going to be savings in the first year because there are certain redundant administrative costs, selling costs that will be eliminated fairly quickly,” Procter & Gamble Vice President Clayton Daley Jr. said in a telephone interview. “Other things will take a little more time to get to.”
Other savings will come over time as Procter & Gamble applies its so-called efficient consumer response initiatives to Tambrands and its Tampax tampon. This includes efforts such as continuous product replenishment, just-in-time inventory management and more efficient promotions and assortment.
In a statement, Tambrands Chairman Edward Fogarty said, “Becoming part of P&G--a; world-class company with global marketing and distribution capabilities--will accelerate the global growth of Tampax and enable the brand to achieve its full potential.”
It’s important for P&G; to thrive abroad because sales in the U.S., its largest market, are likely to rise more slowly than in such emerging markets as Latin America, India and China, said Tony Vento, analyst with Edward Jones in St. Louis.
In 1996, 52% of P&G;'s sales of $35.3 billion came from outside North America, up slightly from 50% of its 1994 sales of $30.4 billion, Vento said.