A key element of Procter & Gamble's (P&G) bid for Gillette is the scheme to repurchase $18 billion (€13.8 billion) to $22 billion of P&G stock within the next 12-18 months.

The unusual move, devised by the consumer product group's investment bankers, was designed to make the deal more palatable to P&G shareholders concerned that the company might be overpaying.

"P&G needed to manage down its dilution and the natural solution was to put cash in the deal," said one person involved in the talks. "There was also a belief that this would help bring stability to the share price, which was in everybody's interests."

Nominally, the transaction is structured as a straight stock swap, with Gillette shareholders receiving an 18 per cent premium over the company's shares based on Thursday's closing prices.

P&G and Gillette were quick to point out that the buy-back programme meant P&G effectively was paying a mix of cash and stock.

Analysts in New York said the effect of such a mix would be to see P&G's earnings enhanced much earlier. - Financial Times Service