German Firm to Buy Dial Corp. for $2.9 Billion

Dial Corp., the maker of Dial soap, Renuzit air fresheners and Armour Star canned meats, is being acquired for $2.9 billion in cash by Henkel, a German maker of detergents, cosmetics and adhesives.

The deal, announced late Sunday, would give Henkel a bigger foothold in North America and a portfolio of well-known brands.

It allows Dial to become part of a larger, global operation to compete better with consumer product behemoths such as Procter & Gamble and Unilever.

“It’s a major step toward the further integration of our home care and personal care business,” said Ulrich Lehner, president and chief executive of Dusseldorf-based Henkel. “In these two business segments particularly, we have been rather underrepresented in the United States, the largest and most important economy in the world.”

The deal would keep Dial’s headquarters in Scottsdale, Ariz., and Dial Chief Executive Herb Baum would remain in his post for two years.

Baum said Monday that upper-level management also would stay put and that there were no plans to shrink the company’s 2,900-member workforce.

Late last year, Dial sold its struggling business in Argentina, which had been hurt by that country’s faltering economy.

“We had a job to do three years ago to begin to clean up the company,” Baum said. “Dial is a company fixed and primed for growth.”

The deal is subject to approval by Dial shareholders and government regulators. The companies hope to close the transaction by the end of April 2004.

Henkel has agreed to pay $28.75 for Dial shares, an 11% premium over Dial’s closing price of $25.88 Friday in New York trading and a 22% premium over Dial’s average price over the last 60 days.

Henkel said the deal, to be financed initially with cash and debt, would provide an immediate earnings boost.

The company said it expected to sell later a significant part of its minority investments in Clorox Co. of Oakland, or Ecolab Inc. of St. Paul, Minn.

“Neither Dial nor Henkel is getting a great deal. I think they had the shareholders in mind for the long term,” said Bill Steele, an analyst with Banc of America Securities, which does investment banking for Dial.

“There will likely be minimal change to Dial’s base business, other than they’ll be supported by a bigger organization that can put a few more dollars behind their product, even more so than Dial could,” he said.

On the New York Stock Exchange, Dial shares surged $2.50, or 9.7%, to $28.38; Clorox shares fell $1.29, or 2.7%, to $47.10; and Ecolab shares were down 57 cents, or 2%, to $27.27.