Procter & Gamble’s spate of sales
As we saw in the last article, Procter & Gamble (or P&G) (PG) has probably divested three of its lines of businesses to Coty, Inc. (COTY) for $12 billion, according to unconfirmed media reports. The sale comes as P&G looks to concentrate on its core businesses.
Earlier this month, P&G announced it could be either divesting, discontinuing, or consolidating as many as 100 brands from its 180-brand portfolio. The company may also exit several businesses altogether. The decision could reduce the number of P&G’s brands by 60%. The company has already looked at exit options for ~40 brands.
Last year, P&G revealed that going forward, it will focus on 70–80 core brands that generated ~90% of its sales and ~95% of its profits. These brands, listed below, are also market leaders in their respective segments.
- Tide is the market leader in the US laundry market with 60% share.
- Pampers leads the US diaper market with 44% market share.
- Skincare brand Olay has an 8% global market share.
- P&G’s market share is as high as 70% in global blades and razors, which includes Gillette products.
That’s part of the strategy that CEO (chief executive officer) A.G. Lafley is using to revitalize the company. The strategy will enable P&G to do the following:
- focus on its core portfolio
- maintain the market leadership position of top-selling brands
- look at verticalizing its portfolio
- cross-sell products to customers
Buyers for P&G brands are diverse. Last December, P&G sold its Duracell brand to Warren Buffet’s Berkshire Hathaway (BRK-B) for $4.7 billion. The deal will happen through a split transaction in which P&G transfers its recapitalized Duracell business in exchange for P&G shares held by BRK-B. The transaction is expected to close in 2H15.
P&G also sold Camay and Zest soap brands to global rival Unilever (UN). The deal price was undisclosed.
P&G gets rid of Rochas
In March 2015, Inter Parfums (IPAR) announced it’s acquiring P&G’s Rochas brand of perfumes. The deal price was reported at $108 million, representing 2.3x sales generated in fiscal 2014. P&G is currently trading at 2.8x sales as of June 23, 2015.
P&G is part of the portfolio holdings of the First Trust Consumer Staples AlphaDEX ETF (FXG). FXG has 6.9% of its holdings invested in household products companies. P&G is also part of the iShares Core S&P 500 ETF (IVV). IVV invests 9.5% of its holdings in consumer staples companies.