Procter & Gamble said today it would buy Gillette for about $57 billion in stock, uniting two iconic US producers of household goods ranging from Pampers diapers to Duracell batteries.
The combined company would boast more than $60 billion in annual revenues, giving it increased leverage at stores ranging from discounters to grocers.
The maker of Tide, which also unveiled a stock buyback of up to $22 billion in the next 18 months, is paying an 18 per cent premium in the agreed deal for Gillette, best known for its razors.
P&G promised cost cuts of up to $16 billion and heralded lay-offs of 4 per cent of the combined 140,000 workforce.
Gillette shares traded in Germany jumped more than 9 per cent from the US close to €38.50 euros, compared with the €53.94 per-share value of the takeover deal.
P&G fell more than 6 per cent from its New York close to €39.76. The news also spurred a rise in shares of European consumer goods companies such as French pen, lighter and razor maker Bic and UK household cleaning goods maker Reckitt Benckiser, on speculation it could spark merger activity in a sector long believed ripe for consolidation.
Retailers, led by discounter Wal-Mart Stores Inc., have pressured consumer products makers to keep prices low, pinching profits.
"That is a hell of a big deal and it gets people thinking that Unilever or others could go back on the acquisition trail," said one dealer in Paris, adding that Bic would be an obvious target.
Colgate-Palmolive might eye Reckitt, traders said.
In Davos, EU antitrust chief Neelie Kroes said she expected to review the planned deal by P&G and Gillette.