Procter & Gamble Co. (PG) selling pet care unit to Mars Inc. for $2.9 billion

Deal impacts 1,100 empoyees, 325 in Mason

CINCINNATI - Procter & Gamble Co. has struck a deal to sell most of its pet care business to Mars Inc. for $2.9 billion in cash, a move many have expected as P&G places increasing emphasis on its largest, most profitable brands.

“Exiting Pet Care is an important step in our strategy to focus P&G’s portfolio on the core businesses where we can create the most value for consumers and shareowners,” said P&G CEO A.G. Lafley in a press release. “We are confident that the business will thrive at Mars, a leading company in pet care.”

The sale affects about 1,110 P&G employees globally, including 325 in the Tri-State. P&G pet care is based in Mason. It’s not clear whether facilities will remain there under new ownership. A Mars spokesperson said the company will look for operating synergies following the acquisition, but didn't say whether that means job cuts.

"Upon closure of the transaction, we will seek to understand further the acquired brands, technology , markets and also their dedicated associates," said a Mars spokesperson. "Clearly this process is going to take some time."

Mars is a McLean, Va.–based maker of candy, pet food and other food products. Its pet care brands include Pedigree, Whiskas, Banfield and Royal Canin.

P&G is selling its Iams, Eukanuba and Natura brands to Mars Petcare, which will operate the former P&G brand units in North America, Latin America and other selected countries. Mars has an option to purchase other territories. P&G is seeking an alternate buyer for its European pet food business. P&G said the territories being sold represent about 80 percent of its pet care revenue.

The deal is subject to regulatory approval and is expected to close in the second half of 2014.

“This will help push the stock higher,” said Matt McCormick, vice president and portfolio manager for Bahl and Gaynor Investment Counsel downtown, which owns more than 4 million P&G shares.  “Lafley is making what I feel are bold steps to unlock shareholder value. I expect more to come. The next step is looking at Braun, looking at Duracell. In order to make the share price new and improved, they’ve had to shrink to grow.”

Procter & Gamble paid $2.3 billion to enter the pet food business with its 1999 purchase of the Iams Co. In 2010, it acquired the premium pet food brand, Natura Pet Products, for an undisclosed price. The $2.9 billion sale price drew the praise of Bernstein Research analyst Ali Dibadj. 

"From our estimates, this is a very attractive valuation for the business," Dibadj said. "We believe the deal is a good thing for P&G and its shareholders."

P&G shares rose above $82 within an hour of the announcement, but retreated to yesterday's closing price of $81.35 by mid-day Wednesday.

RELATED: Rising speculation on Iams divestiture
MORE: Product quality problems dogged P&G pet care

For more stories by Dan Monk, go to www.wcpo.com/monk . Follow him on Twitter @DanMonk9.

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