01—Abstract
Summary
Summary of the 8-K filed May 21, 2001. Cited figures are marked; the original filing is the authoritative source.
On May 21, 2001, The Procter & Gamble Company announced it will acquire the Clairol business from Bristol-Myers Squibb for $4.95 billiona in cash.
Clairol is a global hair color and hair care company with roughly $1.6 billionb in annual worldwide sales. P&G says a Section 338(h)(10) joint tax election reduces the effective cash cost to about $4.0 billion, equal to roughly 2.5x sales and 12x EBITDA. The deal is subject to regulatory approvals.
Strategically, the deal lets P&G enter the hair colorant category, which has grown 4-6% annually over the past five years, about twice the rate of shampoo, conditioners and styling aids. P&G expects about $900 millionc of incremental hair care sales and $700 million from hair colorants, plus roughly $200 million in cost synergies from combined marketing, manufacturing and business processes.
For earnings, P&G expects year-one dilution of 6-8 cents per share, or under 5 cents excluding one-time transition services costs to Bristol-Myers Squibb and employee retention incentives, with the deal becoming slightly accretive in year two. Investors should weigh the strategic fit against the near-term dilution, the reliance on the tax election, and the fact that about 75%d of Clairol's sales are in North America while most of P&G's hair care sales are outside it.
02—Key points
Key Highlights
- P&G will acquire Clairol from Bristol-Myers Squibb for $4.95 billion in cash, or about $4.0 billion after the Section 338(h)(10) tax benefit.
- Clairol generates about $1.6 billion in annual worldwide sales, including hair colorant brands Nice 'n Easy, Natural Instincts, Miss Clairol and Hydrience, and hair care brands Herbal Essences, Aussie and Infusium.
- Implied valuation is about 2.5x sales and 12x EBITDA on the post-tax-benefit price.
- Year-one EPS dilution of 6-8 cents per share, under 5 cents excluding one-time costs; expected to be slightly accretive in year two.
- P&G projects about $200 million in annual cost synergies from combining marketing, manufacturing and business processes.
- The deal gives P&G entry into the hair colorant category, which has grown 4-6% annually over five years, roughly double the growth of hair care staples.
- Closing is subject to regulatory approvals; P&G hosted an analyst meeting and webcast on May 21, 2001 to discuss the deal.
03—Questions
Frequently Asked Questions
How much will P&G actually pay for Clairol?
The headline price is $4.95 billion in cash. P&G says the Section 338(h)(10) joint tax election effectively reduces the cash payment to about $4.0 billion.
Will the acquisition increase or reduce P&G's earnings per share?
It is expected to be dilutive in year one by 6-8 cents per share, or less than 5 cents excluding one-time transition services and employee retention costs. P&G expects it to be slightly accretive in year two.
What strategic benefit does Clairol bring to P&G?
Clairol gives P&G a presence in the hair colorant category, which is growing faster than shampoos, conditioners and styling aids, and strengthens its overall hair care position with brands such as Herbal Essences and Aussie.
Where do Clairol's sales come from, and how does that complement P&G?
About 75% of Clairol's sales are in North America, while about 70% of P&G's hair care sales are outside North America. P&G expects its global retail network to help expand Clairol brands internationally.
What conditions could affect whether the deal closes?
The acquisition is subject to regulatory approvals. The filing does not detail the specific approvals required or a timeline for closing.
04—Continue