P&G Should Target Beiersdorf, Estee Lauder for Brands, Deutsche Bank Says
Procter & Gamble Co. Chief Executive Officer Bob McDonald should pursue skin-cream maker Beiersdorf AG or Estee Lauder Cos. as he seeks to add international brands, according to Deutsche Bank AG’s William Schmitz.
“If he could do one deal, I think Beiersdorf would be No. 1 on his list,” the Greenwich, Connecticut-based analyst said in an interview. Hamburg-based Beiersdorf, which makes the Nivea brand, generates almost two-thirds of its revenue in Europe.
Estee Lauder, whose beauty labels include La Mer, Aveda, Mac and Clinique, also gets more than half its sales from outside the Americas. McDonald, 57, said last week that he aimed to add more global brands as P&G bolsters operations in developing countries such as Brazil and China, where growth is outpacing the U.S.
McDonald probably would have to spend more than $10 billion to buy either Estee Lauder or Beiersdorf, based on today’s market values. Cincinnati-based P&G, the maker of Olay skin products and Gillette razors, had more than $16 billion in operating cash flow last year.
The company generated more than 60 percent of its $79 billion in sales outside the U.S. last year. While Beiersdorf “doesn’t make a lot of money in the U.S., it would make a lot of money if P&G owned it,” Schmitz said. P&G could use its current operations in developing markets to help boost sales of Beiersdorf’s products overseas, he said. Schmitz recommends holding P&G shares.
Willing Partner?
The German company may not be willing to sell, Schmitz said, which would limit McDonald, who has refused to pursue hostile transactions. Beiersdorf spokesman Ralph Esper said P&G hasn’t indicated any interest in a takeover.
Estee Lauder would fit well with P&G’s strategy because of its international makeup brands, Schmitz said. Jill Marvin, a spokeswoman for the New York-based company, declined to comment.
“We have significant white-space expansion opportunities throughout the world,” P&G spokesman Paul Fox said, referring to product categories and regions where P&G doesn’t operate. He declined to comment on individual companies today in a telephone interview.
P&G rose 13 cents to $60.27 at 11:42 a.m. in New York Stock Exchange composite trading, while Estee Lauder advanced 62 cents to $58.20. Beiersdorf increased 29 cents to 43.36 euros at the close of trading in Frankfurt.
To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net
Rate These Stories
Rate this Page