Today’s big business news is that Dow Component SBC, the company that used to be known as Southwestern Bell, is in talks to buy former parent company, none other than Ma Bell herself, former Dow Component AT&T.
Oh wait, that’s yesterday’s big business news.
Today’s big business news is that Dow Component Proctor and Gamble is planning to buy Gillette for about $57 Billion in stock, creating the world’s biggest consumer product firm. It is a rich valuation. If you happened to own shares of Gillette yesterday and the deal goes through as planned in a timely fashion and you hold until the end, you stand to make a cool 18% on the deal, not too shabby. The second richest man in the world, Warren Buffett thinks this is a great idea, partly because he stands to make a lot of money on the deal.
It is a safe bet that unless you are actively boycotting these companies, you have their products in your home. P&G’s complete product list includes Alldays and Allways feminine hygiene products, Attends incontinence products, Aussie hair-care, Bold, Dash, Era and Cheer detergents, Hugo Boss clothing, Bounce and Downy fabric softeners, Bounty paper towels, Charmin toilet paper, Cover Girl cosmetics, Crest toothpaste, Dawn and Cascade dish detergents, Eukanuba pet food, and that only takes us through the letter E. By my count, there are over 15 kinds of clothes detergents –add in fabric softeners and it’s hard to do laundry without them — about 10 varieties of dish detergent, over 25 hair care lines, a dozen kinds of makeup, fragrances, and toiletries, a half dozen kinds of toothpaste, another half dozen body soaps, and 2 different lines of toilet paper and dog food. Gillette is primarily known for their shaving products, but don’t forget they own Duracell, Oral-B, and a line of skin care products. Just think for a moment about how much of your local grocery store is devoted to their products. Now consider what would happen if they decided to take advantage of this position –ooops, I mean “leverage” their “market advantages.”
Of course, to pull this deal off, they are planning on laying off 6000 people. This deal will also have an impact — mostly negative — on advertisers, suppliers, and of course competitors. In short, the gorilla in the kitchen is rapidly approaching 800 pounds. Will you benefit from any of this? Probably not.
I mean, not unless you are a shareholder.
I leave you with economic growth is slowing while exports drop, the law of unintended consequences, and finally don’t dare think in a crisis.