CINCINNATI - Procter & Gamble Co. executives are likely to field questions about a potential Iams divestiture Friday morning, when the consumer products giant reports fiscal first quarter earnings.
The pet food division has long been considered a candidate for a spin off by P&G, but that speculation increased recently when CEO A.G. Lafley disclosed the company has a “watch list” of business units that could be sold.
A Bloomberg report on Wednesday said Del Monte is now seen by analysts as a logical buyer for Iams because it recently agreed to sell its consumer products division and is looking to grow its pet products offerings. Del Monte’s pet food brands include Meow Mix, Kibbles ‘n Bits, Gravy Train and Natural Balance.
The sale of Iams could free up resources for P&G to focus on its most successful brands, improving its chances for increasing future profits and, ultimately, its stock price.
“Lafley needs to do something to get the stock higher,” said Matt McCormick, vice president and portfolio manager for Bahl and Gaynor Investment Counsel downtown. “Iams or other possible spinoffs will definitely come up on the call.”
Bernstein Research analyst Ali Dibadj estimated in 2011 that P&G could fetch a pre-tax sale price of $2.4 billion for its pet care business. But he is not sure Del Monte could pull off the deal.
“That would be a really big deal for Del Monte and anti-trust issues may arise in the U.S.,” he said.
P&G declined to comment on whether it is talking to Del Monte about a pet food sale.
Analysts expect the company to report earnings of $1.05 per share Friday, down a penny from the same period a year ago. Revenue is expected to reach $21.04 billion, down from $20.74 last year.