Case Study Procter & Gamble

1. Description of the Case
In January 2005, the Procter & Gamble Company (P&G) announced that it signed a deal to buy 100% of the shares of the Gillette Company. The transaction was valued at approximately $57 billion making it the largest acquisition in P&G history (The Economist, 2005a,b,c). P&G will pay 0.975 share of its common stock for each share of Gillette common stock as a part of the deal. A.G. Lafley, P&G chairman and chief executive said, “This combination (…), at a time when they are both operating from a position of strength, is a unique opportunity. Gillette and P&G have similar cultures and complementary core strength in branding, innovation, scale and go-to-market capabilities, making it a terrific fit” (Euromonitor, 2005).

The competition agencies, the European Commission (EC) and the Federal Trade Commission (FTC), considered the merger happened between the two companies a mixed conglomerate merger that creates or strengthens a dominant position. This dominant position, especially in overlapping markets of both firms, generates anticompetitive effects.
This paper investigates the P&G/Gillette merger case focusing on the European Commission assessment. Firstly, it analyse the relevant markets for both companies and points out the sectors in which they overlap. Secondly, it investigates the horizontal and conglomerate effects of the merger, to assess whether the effects are detrimental for overall

Because of expectations from the deal, P&G raised the annual revenue growth outlook to 5 to 7 percent, rather than its earlier target of 4 to 6 percent (The Economist, 2005a,b,c). P&G anticipated increase in profits in line with the increase of the products offered by it. The combined company was expected to have annual sales of $60 billion. It would own 21 brands of Gillette Company which has sales of more than $1