CINCINNATI -- Procter & Gamble Co. said yesterday it will buy Tambrands Inc. for $2 billion in cash and assumed debt, hoping it can make tampons as acceptable in developing nations as they are in the United States and parts of Europe.
P&G; will pay $50 a share in cash, or $1.85 billion, and assume nTC $150 million in debt for Tambrands, whose Tampax products account for half of tampon sales worldwide. It's the biggest purchase for P&G;, which sells Always and Whisper sanitary pads.
The company wants to put Tampax tampons on as many store shelves around the world as its Crest toothpaste and Pampers diapers. It will then use its marketing expertise to overcome the reluctance of many women to try tampons; only 25 percent of women use them, mostly in the United States and Europe.
"P&G; is one of a few companies that has the time horizon to help educate the world about why this product is appealing," said analyst Heather Hay of Prudential Securities.
Investors cheered the move by P&G;, the maker of Tide detergents and Cover Girl cosmetics. Its shares rose $4 to $119.75 in trading of 2 million, more than its three-month daily average of 1.3 million. Shares in Tambrands rose $2 to $48.13, the highest level since May, in trading of 2.8 million.
P&G;, with headquarters in Cincinnati, is the world's largest maker of consumer products. Its last big purchase was Richardson Vicks, the maker of Vicks products, which it bought for $1.2 billion in 1985. The company is looking at other acquisitions to augment its brands, said John Pepper, the chairman and chief executive. He wouldn't elaborate.
The Tambrands purchase should reduce earnings 2 or 3 cents a share in the first year, but should quickly add to profits after that, said Clayton Daley Jr., P&G;'s treasurer. The combination should save more than $100 million a year by fiscal 2000, he said.
"Our goal is to grow profits by 11 percent to 14 percent a year," he said.
P&G; said it will pay for the purchase with cash and short-term borrowings. The sale, subject to investor and regulatory approval, is expected to close in the next couple of months.
P&G; will give Tambrands the financial resources, marketing experience and distribution network to expand sales outside the U.S. Tambrands, of White Plains, N.Y., has half the U.S. tampon market, valued at $800 million wholesale, but its sales are much lower in foreign markets.
P&G; said it plans to distribute Tampax in Latin America and Asia, which have more than half of the world's population but account for less than 5 percent of Tampax's volume sales.
U.S. antitrust officials will probably take a look at whether tampons are a distinct product, or part of a broader market for feminine hygiene products, said Steve Newborn, a Washington lawyer and former Federal Trade Commission antitrust enforcer.
Antitrust officials will question whether P&G; was likely, without the acquisition, to enter the tampon market in competition with Tambrands, he said.
P&G;'s Rely tampon was pulled from the market in 1980 because of concerns about toxic shock syndrome.
In Europe, the acquisition will come under scrutiny by the European Commission, the executive arm of the European Union.
The purchase comes six months after Tambrands closed four of nine plants and cut 600 jobs, or 17 percent of its work force.
The restructuring was prompted by stagnating sales and plants running at two-thirds capacity. Overseas sales had failed to grow, and rivals, including Playtex Products Inc., had cut prices.
Tambrands' 1996 profit from operations fell 12 percent to $82.8 million, or $2.25 a share, from $94.2 million, or $2.57 a share, a year earlier. Sales fell 3 percent to $662.1 million.
Pub Date: 4/10/97