On March 23, 2011, Colgate-Palmolive (
) agreed to buy
) Sanex brand of personal care products for $954 million. The deal
also includes Colgate selling its laundry detergent business in
Colombia to Unilever for $215 million. As of now, both transactions
are subject to regulatory approval. These two companies compete
Proctor & Gamble
) and Kimberly-Clark (
What Does it Mean for Colgate-Palmolive?
- Colgate strengthens its personal care business in Europe with
shower gels and deodorants marketed under the Sanex brand
amounting to sales of over $265 million in 2010.
- The deal helps Colgate focus on the higher-margin personal
care business amidst rising commodity costs affecting household
care product segments.
- Colgate believes the transaction would increase earnings by
4% and improve margins by 1% by 2012. Also, a deal was imminent
given Colgate's healthy cash position.
You can see a detailed analysis of our $88 Trefis price
estimate of Colgate-Palmolive's stock, which is inline with the
current market price. We estimate that personal care products like
shampoos, soaps, lotions and deodorants make up around 44% of
Colgate's stock value while oral care and pet nutrition make up the
remainder accounting for 44% and 12% respectively.
What Does it Mean for Unilever?
- The sell-off of Unilever's deodorants and bath-care business
in Europe was required on antitrust grounds for European Union's
clearance of the $1.82 billion purchase of Sara Lee Corp's
personal care business in 2010.
- The deal brings in Colgate's laundry brands such as Fab, Vel
and Lavomatic improving Unilever's position in a significant
Latin American market, Colombia.
- In line with its goal to double revenues within this decade,
Unilever has been on an acquisition spree, having acquired
Alberto-Culver and Sara Lee's personal care and European laundry
care businesses in 2010.
Personal care items like shampoo, lotions, laundry detergents
and deodorants make up just over 40% of Unilever's value by our
estimates which exclude various food items and home cleaning
products that make up the rest. You can see a detailed analysis of
$35 Trefis price estimate of Unilever's stock
, which is around 15% ahead of the current market price.