Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, July 18, 1995 TAG: 9507180053
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: Bloomberg News Service
DATELINE: DALLAS LENGTH: Medium
The widely anticipated purchase will combine Kimberly-Clark's Kleenex tissues and Huggies disposable diapers with Scott's Cottonelle, Scotties and Viva tissues and paper towels, creating the world's second-largest maker of consumer products.
``The key is to gain shelf space, particularly in Europe, a weak area for Kimberly-Clark,'' said analyst Evadna Lynn at Dean Witter Reynolds, adding that Scott's No. 1 position in tissues in Europe may help the Dallas-based company's ability to sell diapers there.
Kimberly-Clark shares were up $4.871/2 a share, closing on the New York Stock Exchange at $63.50 on trading of 3.8 million shares. Shares in Scott Paper were down - falling $2.75 a share to $46.371/2 trading 5.1 million shares on the NYSE - because investors who had seen sizable gains in their shares were selling rather than waiting for the transaction.
``Some people may feel the price is too low,'' said analyst Kathryn McAuley of Brown Brothers Harriman. ``Also there may be short-term holders who have a myopic view of the universe and are getting out.''
Scott holders will receive 0.765 share of Kimberly-Clark stock for each share held - less than the 0.78 anticipated ratio reported June 23.
``I thought that Scott Paper would have gotten a better price,'' said James Ayscue, an analyst at PNC Bank in Philadelphia, which owns shares in the Boca Raton, Florida-based company.
Scott Paper Chairman and CEO Albert J. Dunlap, whose 14 months of restructuring lifted the company's stock 150 percent, said he will have an ownership position in the combined company. Although he will continue as an adviser, Dunlap said he will be able to move to another company, as long as it is not a competitor.
Kimberly-Clark Chairman and Chief Executive Wayne R. Sanders, who will hold the same position in the combined company, said he expects the acquisition to be completed by the fourth quarter. He added he expects $400 million in annual savings by 1998, but declined to say how many jobs would be lost in the consolidation.
Kimberly-Clark will have more than $12 billion in annual revenue, making it a ``much more formidable competitor'' to Cincinnati-based Procter & Gamble, ``particularly in Europe, where Kimberly-Clark has been weak and Scott strong,'' said McAuley. No. 1 Procter & Gamble has annual sales of more than $30 billion.
The combination creates the biggest maker of facial tissues in the world and heightens competition in the United States, where P&G's towel and tissue business is strongest.
Kimberly-Clark's No. 1 Kleenex and Scott's No. 4 Scotties facial tissue, for example, will command 50.4 percent of the $1.1 billion facial tissue market, with sales of $569 million, according to Information Resources Inc. P&G's Puffs brand, which is No. 2, had $343 million in sales for the year ended April 2.
``Procter & Gamble may not be hurt, but it will be a much more level playing field,'' McAuley said.
The two companies are complementary in other markets, as well: Kimberly-Clark is strong in Korea and Scott in Southeast Asia, while Kimberly-Clark is No. 1 in Mexico where Scott Paper is No. 2, Dean Witter's Lynn said.
``They fit together beautifully, without a lot of product overlaps,'' Lynn said, making antitrust problems unlikely.
The acquisition is the second-largest announced this year, behind the $7.1 billion purchase of pharmaceutical company Marion Merrell Dow Inc. by the German chemical maker Hoechst AG.
Kimberly-Clark, which has 160.4 million shares of common stock outstanding, said it will issue 116.0 million new shares in exchange for Scott's 151.6 million shares. Scott holders will own 42 percent of the combined company.
by CNB