The Procter & Gamble Company
) recently entered into an agreement to sell off three of its pet
care brands to privately held American confectionary and pet food
manufacturer, Mars, Inc. The three brands -- Iams, Eukanuba and
Natura -- will be sold for $2.9 billion in cash. The transaction
is expected to complete in the second half of 2014.
The sell-off includes businesses in North America, Latin America
and some of other countries, which together constitute 80% of
P&G's worldwide pet care business. However, the agreement
does not include P&G's pet care business in the European
Union. P&G has separate plans for these businesses.
P&G will report the to-be-divested pet care business as
discontinued operations in the upcoming Apr-June 2014 quarter.
The company expects to restate earnings of about 3 cents and 4
cents per share from core earnings to discontinued operations for
both fiscal 2013 and fiscal 2014, respectively.
This will leave the fiscal 2014 earnings growth rate guidance
unchanged at 3-5%. The company also mentioned that fiscal 2015
earnings will not be materially impacted by this transaction. The
net proceeds from the transaction will be used for general
Pet care is a part of P&G's Health Care segment. Prior to
July 1, 2013, it was reported under the Fabric Care segment. Last
year in Mar 2013, the company recalled dry pet food manufactured
by its subsidiary, Natura Pet Products Inc., due to possible
contamination with Salmonella. As a result, the volumes of pet
care have been declining since the fourth quarter of fiscal 2013.
This strategic divesture will help P&G to focus its resources
on its core business.
P&G has been focusing on improvement of its product portfolio
through strategic initiatives, which enable it to concentrate on
its fast growing businesses. For example, in Jun 2012, the
company divested its snacks unit, Pringles to
) to focus more on beauty and personal care products.
In fiscal 2013, P&G divested its underperforming bleach
business in Italy and Portugal and the Braun household appliances
business. In 2014, the company plans to divest its remaining
global bleach businesses.
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Mars, the maker of M&M'S, Snickers and Orbit, will add these
three brands to its existing Petcare segment. Mars is already
known for its pet products like Pedigree, Royal Canin and
Whiskas. The addition of these three brands will further widen
its product portfolio.
P&G currently carries a Zacks Rank #4 (Sell). Some
better-ranked companies from the consumer goods sector include
Diamond Foods, Inc.
J&J Snack Foods Corp.
). All these stocks carry a Zacks Rank #2 (Buy).