Blog: Dean BestShould we flush away talk of P&G bid for Unilever?

Dean Best | 2 June 2011

As well as the market chatter about Bunge may be making a bid for Tate & Lyle, there is also speculation that Procter & Gamble could table an offer for Unilever.

There were rumours in the UK yesterday that Procter & Gamble, owner of brands from Duracell batteries to Charmin toilet paper, may be lining up a GBP38bn (US$62bn) bid for Unilever, which makes, among other things, Domestos bleach.

The rumours surfaced in UK newspaper The Daily Mail, which reported "wild rumours from across the pond". The report also said that P&G, which offloaded the last of its food assets in April when it sold Pringles to Diamond Foods, had lined up Nestle to take on the "unwanted" (food) parts of Unilever's business.

The Mail's report was then picked up in India and reported there.

Today, there was a muted response from analysts in the City. Andy Smith, an analyst at MF Global, said a P&G bid was "unlikely" and told clients to use any rally in Unilever's shares as a time to sell.

"Whilst there are some parts of Unilever that P&G would undoubtedly covet (eg parts of the Dove personal care franchise), the reality is that there would be massive anti-trust issues across the US, Europe, Latin America and large parts of Asia in multiple categories - for example laundry detergents, deo, hair care, skin care, oral care etc.," Smith said.

The analyst also said the assertion that Nestle would be interested in parts of Unilever's food portfolio "seems wide of the mark".

Smith explained: "Nestle has no interest in spreads and there would be insurmountable anti-trust issues in ice cream in most major countries. In beverages Unilever is aligned with PepsiCo for its LiptonIce product - whereas Nestle is aligned with Coca Cola. There would be major anti-trust issues too for Nestle acquiring the huge Lipton brand in the US, whilst Knorr (Unilever) and Maggi (Nestle) are bitter rivals in the culinary space in emerging markets."

Another analyst, who wanted to remain anonymous, also cited the potential anti-trust concerns and then, more succinctly, described the speculation as "nonsense, trading floor b******s rumours".


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