Gillette rebuffs subpoena
Massachusetts Secretary of State William Galvin in response to a
subpoena claiming that acquirer-to-be P&G is offering too
little for the global razors and toiletries company, reports
Simon Pitman.
The much-publicized merger between Gillette and P&G comes with a $57 billion price tag - a figure that turned many heads in the industry, but one that Galvin and some industry experts say could be undervaluing the company by as much as $15 billion.
Galvin is fighting the conditions of the merger because he beleives that it could also lead to the termination of thousands of work contracts for Gillette's Boston-based employees. In contrast to the job losses it is beleived that P&G chairman and CEO James Kilts will earn $153 million if the deal goes through.
But in retaliation against Galvin's action, Gillette says the state Secretary lacks the necessary authority under Massachusetts law to pursue his inquiry against the merger. In its defence Gillette said it had voluntarily co-operated against Secretary Galvin, producing all the necessary documents to prove its position.
Gillette could indeed prove to have the law on its side. In a statement Gillete's vice president of communications, Eric Kraus, stressed that the company was actually incorporated in Delaware.
"This transaction is subject to regulations by the SEC under federal law and by the regulatory authorities," said Kraus, indicating that the state laws in Massachusetts may not influence the outcome.
Gillette said that the Secretary had filed the action on April 15, despite the co-operation it had shown, leaving it in no other position than to contend his subpoena. The company said it would vigorously defend its action against the Secretary in a court of law.
Both Gillette and P&G have made no secret that the deal will lead to big changes to employment structure, with synergies leading to significant job cuts. As Gillette's headquarter are in Boston it is expected that this will be one of the areas where losses will hit hardest.
Galvin says he wants detailed accounts of how many jobs are expected to go and where. Gillette estimates that its workforce will shrink by 4 per cent, representing approximately 6,000 of its 140,000 combined global workforce.
