Petition of the Procter & Gamble Company For Approval of Proposed ...

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  • PUBLIC RECORD VERSION

    UNITED STATES OF AMERICABEFRE FEDERAL TRADE COMMISSION

    COMMISSIONERS: Deborah Platt Majoras, ChairmanPamela Jones HarbourJon Leibowitz

    Wiliam E. KovacicJ. Thomas Rosch

    )))

    THE PROCTER & GAMBLE COMPANY, )a corporation; ))))))))

    In the Matter of

    andDocket No. C-4151File No. 051-0115

    THE GILLETTE COMPANY,a corporation.,

    PETITION OF THE PROCTER & GAMBLE COMPANYFOR APPROVAL OF PROPOSED DIVESTITURE

    Pursuant to Section 2.41(f) of the Federal Trade Commission ("Commission" or "FTC")

    Rules of Practice and Procedure, 16 CF.R. 2.41(f) (2005), and Paragraph II.A. of the final

    Decision and Order approved by the Commission in the above-captioned matter, The Procter &

    Gamble Company ("P&G") hereby fies this Petition for Approval of Proposed Divestitue

    ("Petition") requesting the Commission's approval of the divestitue of the APDO business,

    including Right Guard, Soft & Dri, Dry Idea, Natrel Plus, and Balance ("the APDO Assets") of

    The Gilette Company ("Gilette"), to The Dial Corporation ("Dial"), a subsidiar of Henkel

    KGaA ("Henkel").

  • .~PUBLIC RECORD VERSION

    I. INTRODUCTION

    On September 23,2005, P&G and the Commission entered into an Agreement

    Containing Consent Orders, including an initial Decision and Order and an Order to Maintain

    Assets. On October 1,2005, pursuant to an Agreement and Plan of Merger between P&G and

    Gilette dated Januar 27, 2005, P&G completed its acquisition of Gilette. After a period of

    public comment, on December 15, 2005, the Commission issued its final Decision and Order

    , ("Order") (with minor changes) and Order to Maintain Assets (without changes) (collectively,

    the "Consent Agreement"). At the same time it reissued its Complaint (also without changes).

    Paragraph V.19 of the Commission's Complaint alleges that the acquisition by P&G of

    the APDO Assets would substantially lessen competition in the United States market for men's

    antiperspirants/deodorants because the acquisition would significantly increase the concentration

    level in the market, leaving P&G as the leading supplier. Paragraph IV;A. of the Order requires

    P&G to divest the APDO.Assets within 120 days from the date the Order becomes final to a

    buyer approved by the Commission.

    On Februar 20,2006, Gilette and Dial executed an Asset Sale and Purchase Agreement

    (including attachments, exhibits, anexes, and schedules) (collectively, the "Agreement") for the

    sale of the APDO Assets. As par of the transactions contemplated by the Agreement, P&G and

    Dial wil execute a Transitional Supply Agreement and a Transitional Services Agreement

    (collectively, the "TSSA") for provision of transitional supply and services by P&G to DiaL. A

    copy of the Agreement is attached hereto as Confidential Exhibit A.

    P&G desires to complete the proposed divestiture of the APDO Assets as soon as

    possible following Commission approval. Prompt consummation will fuher the puroses of the

    Decision and Order and is in the interests of the Commission, the public, P&G, Dial, and Henkel

    because it wil allow Dial and Henkel to move forward with their plans for the competitive

    2

  • PUBLIC RECORD VERSION

    operation of the divested business, and it will allow P&G to fulfill its obligations under the

    Consent Agreement. P&G accordingly requests that the Commission promptly commence the

    period of public comment pursuant to Section 2.41 (f)(2) of the Commission's Rules of Practice

    and Procedure, 16 C.F.R. 2.41 (f)(2), limit the public comment period to the customar thirty-

    day period, and grant this Petition by approving the divestitue of the APDO Assets to Dial

    pursuant to the proposed agreement as soon as practicable after the close of the public comment

    period.

    This Petition describes the principal terms of the Agreement by whichP&G proposes to

    divest the APDO Assets to Dial and explains why the Agreement satisfies the objectives and

    requirements of the Consent Agreement by establishing a strong and effective competitor in the

    sale of men's antiperspirants/deodorants in the United States.

    II. REQUEST FOR CONFIDENTIAL TREATMENT

    Because this Petition and its attachments contain confidential and competitively sensitive

    business information relating to the divestitue of the APDO Assets, P&G has redacted such

    confidential information from the public version of this Petition and its attachments. i The public

    disclosure of this information would prejudice P&G, Dial, and Henkel, could cause harm to the

    ongoing competitiveness of the APDO Assets, and could impair P&G's ability to comply with its

    obligations under the Consent Agreement.

    Pursuant to Sections 2.4 1 (f)(4) and 4.9(c) of the Commission's Rules of Practice and

    Procedure, 16 C.F.R. 2.41 (f)(4), 4.9(c), P&G requests, on its own behalf and on behalf of Dial

    and Henkel, that the confidential version of this Petition and its attachments and the information

    i For the convenience of maintaining the public record, P&G is submitting two versions of this Petition: a

    confidential version that contains confidential and proprietary information and documents necessary for theCommission to assess this Petition, and a redacted version that excludes confidential and proprietary information forplacement on the public record.

    3

  • ... PUBLIC RECORD VERSION

    contained therein be accorded confidential treatment under 5 U.S.C. 552 (2000) and Section

    4.l0(a)(2) of the Commission's Rules of Practice and Procedure, 16 C.F.R. 4.iO(a)(2). The

    confidential version of this Petition is also exempt from disclosure under Exemptions 4, 7(A),

    7(B), and 7(C) of the Freedom ofInformation Act, 5 U.S.C. 552(b)(4), (b)(7)(A)-(C), and the

    Har-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. l8a(h) (2000).

    III. THE PROPOSED ACQUIRER

    Paragraph IV.A of the Order requires P&G to divest the APDO Assets within 120 days

    from the date the Order becmes finaL. Pursuant to this requirement, P&G has dilgently sought

    an acquirer that would be acceptable to the Commission, and, in its compliance reports

    previously fied with the Commission on November 8, 2005, Decmber 7,2005, and Januar 6,

    2006, P&G has provided a full description of its efforts to divest the APDO Assets.

    According to the 2003 Statement of the Federal Trade Commission's Bureau of

    Competiton on Negotiating Merger Remedies (the Merger Remedies Statement), to be an

    acceptable buyer, a divestiture acquirer must be financially and competitively viable. The

    acquirer must be able-with the package of assets to be divested-to maintain or restore

    competition in the relevant market. Key factors to consider in this analysis are whether the

    proposed acquirer has (1) the financial capacity and incentives to acquire and operate the

    package of assets, and (2) the competitive abilty to maintain or restore competition in the

    marketplace.

    As discussed in more detail below, Henkel and Dial have both the financial capacity and

    the incentives to acquire and operate the APDO Assets and also the competitive ability to

    maintain or restore competition with respect to APDO sales in the United States. Henkel's and

    Dial's satisfaction of these key factors demonstrates that they are an acceptable acquirer suitable

    for approval by the Commission.

    4

  • PUBLIC RECORD VERSION

    A. Henkel and Dial Have the Financial Abilty To Successfully Complete theTransaction and Invest in the APDO Assets on a Going-Forward Basis

    Henkel is raned #470 in the 2005 Forte Global 500 list of the world's largest

    corporations,2 with global revenues for fiscal 2005 of 11,974 milion euros (more than $14

    bilion). It has the financial capacity, resources, and incentives to acquire the APDO Assets and

    ensure their continued operation as a viable, ongoing business. Henkel has operations in 125

    countries and employs around 50,000 people. According to its 2005 Anual Report, the

    company has access to substantial assets including liquid fuds and marketable securities valued

    at over $1.2 bilion.3 Henkel's curent financial condition provides great flexibilty in making

    additional investments in the business, as such investments may become necessar or propitious

    in the futue.

    Henkel is an established company with significant experience in the personal care

    category with its hair care, skin care, oral care, bath and shower, soap, deodorant, and fragrance

    products. And, the profitability of the APDO Assets-(CONFIDENTIAL MATERIAL

    REDACTED)-wil provide even greater flexibilty for Henkel and Dial to invest in and expand

    the men's antiperspirants/deodorants business in the United States.

    B. Henkel and Dial Have and Wil Acquire the Necessary Industry Experience,

    Customer Relationships, and Knowledge of the Divestiture Assets ToOperate the Business Successfully, as Henkel and Dial Are Established andIntegrated Producers and Marketers of Personal Care Products

    The Bureau of Competition's 1999 Study of the Commission's Divestiture Process (the

    Divestiture Study) discusses several factors that help to identify an acceptable divestiture buyer.

    Specifically, the Divestiture Study cites the buyer's experience in the relevant industr and

    knowledge of the assets to be purchased as key to a successful, divestiture.

    2 Henkel's c