European competition rules present hurdles for P&G-Gillette merger
merger with Proctor & Gamble this fall, despite complaints from
competitors to anti-competition authorities in Europe. Indeed,
Gillette is so confident about the outcome, it is still going ahead
with a scheduled meeting to win over shareholders' support for the
deal on July 12th, reports Simon Pitman.
Although US authorities have already agreed to the deal, stricter regulations in Europe mean that the proposed merger is not receiving such an easy ride. EU competition authorities were due to give their decision on July 1, but that decision has subsequently been postponed to July 15 in view of a number of discrepancies relating to alleged unfair competition.
This week European competitors put another spanner in the works, as they complained to the EU authorities that the two companies are offering inadequate divestures in an effort to gain anti-trust approval.
According to a report in the Wall Street Journal, sources close to the deal are saying that the new hurdle could jeopardize the European Commission's deadline to approve the merger.
If a decision is not made by this time, the alternative could be to launch a more thorough investigation, which, it is beleived, could last up to six months.
The two companies are both well represented in the oral care sector, where the biggest concerns over competition regulations have been aired. The sources have said that the lone divesture for this category was P&G's Crest SpinBrush business, a relatively minor concession considering how much other cross-over the two businesses have in the category.
However, further concessions could be on the cards, as both P&G and Gillette have said that they are willing to divest oral care businesses to the tune of several hundred million dollars in order to secure the deal.
Further pressure is also coming from the UK consumer lobby group Which. According to a report from MarketWatch, the group agrees with the companies' competitors, saying that the merger could eliminate a number of smaller competitors from retail shelves.
In the meantime Gillette, P&G or the EU competition authorities say that they are unable to comment about the situation. But in a show of confidence, Gillette has decided to go ahead with its planned shareholder vote on the merger for July 12, one that shareholders are expected to agree to.
Last week Gillette announced that it was donating $800,000 towards preventing homelessness in the Greater Boston area, amid rumors that the company's merger with P&G could threaten hundreds of jobs in the city as well.
Although Gillette has supported efforts to provide emergency shelter in its hometown since 2002, industry observers and politicians may be questioning the motives behind the act of charity.
One individual who is certain to do so is Massachusetts Secretary of State William Galvin. Galvin is currently locked in a courtroom battle against Gillette, claiming the terms of the proposed deal with consumer giant Procter & Gamble undervalues Gillette by up to $15 billion.
Galvin is also worried about local jobs. He claims that the Boston area is likely to bear the brunt of the 6,000 people expected to lose their jobs to synergies with P&G. Boston is currently the headquarters for Gillette, making it one of the biggest employees in the city.
Job losses are not the only aspect of the deal that concern Galvin though. The $140 million-plus that Gillette chairman James Kilt is expected to make out of the deal is also a point of contention.
