Gillette May Sell Lagging Units
Gillette Co. said it’s in exclusive talks to sell its lagging Paper Mate, Parker and Watermen pens businesses, whose sales and profit fell last year, to Newell Rubbermaid Inc.
Gillette, whose products include Mach3 razors and Duracell batteries, said the negotiations with Newell also include its Liquid Paper correction-fluid unit. The businesses had $743 million in sales last year. The negotiations with Newell, which makes Berol pens and other office products, are expected to continue for several weeks.
Meanwhile, an analyst said Colgate-Palmolive Co. might be interested in acquiring Gillette to add its dominant share of the razor and blade market. Colgate and Gillette officials declined to comment.
Gillette said in February that it hired investment bankers to explore the possible sale of the pens businesses and three Braun appliance businesses, whose results have prompted four profit warnings in the past 14 months.
“Gillette is fulfilling its promise of focusing on higher-margin businesses,” said Fredric Russell, investment manager with Fredric E. Russell Investment Management Co., which owns Gillette shares.
Gillette declined to comment on a prospective sale price. Newell officials couldn’t be reached for comment.
The acquisition might generate as much as $750 million, or an amount equal to annual sales, said Doug Christopher, analyst with Crowell, Weedon & Co., who rates Gillette as “neutral.”
For Newell, the acquisition would be the largest since its $6-billion purchase of Rubbermaid in March 1999. Newell’s stock has fallen by more than one-third in the past year as sales and profit from Rubbermaid fell short of expectations.
Colgate, whose control over costs has made its earnings a model of predictability, could shore up finances at Gillette, analyst Amy Low Chasen of Goldman, Sachs & Co. wrote in a report.
“There would also be clear synergies, and we believe that management’s financial discipline would bode very well at Gillette,” Chasen wrote.
Colgate’s profits have risen for at least 13 straight quarters, according to First Call/Thomson Financial.
Colgate, though, would be interested only in a friendly purchase, Chasen said. Boston-based Gillette has prized its independence and successfully rebuffed a hostile bid by financier Ronald Perelman in 1986.
While new products have generated most of New York-based Colgate’s growth, “management could have an appetite for strategic acquisitions,” Chasen wrote.
On the New York Stock Exchange, Gillette rose $1.38 to close at $34.75, while Colgate rose 69 cents to close at $53.31 and Freeport, Ill.-based Newell closed up 50 cents at $26.75. The Gillette-Newell talks were disclosed after the end of New York trading.
