The Procter & Gamble Company (PG) is set to fully exit its underperforming pet care business with the sale of the remainder of the its pet care business in Europe to consumer products company, Spectrum Brands Holdings, Inc. (SPB).
On Tuesday, P&G announced that it will sell its Iams and Eukanuba pet care brands in Europe to Spectrum Brands for an undisclosed amount.
In Jul 2014, P&G sold off its American and Asian pet care business to privately-held American confectionary and pet food manufacturer, Mars, Inc. for $2.9 billion in cash, per a deal entered into in April. Europe was not included in that deal, except Russia and Turkey.
The Spectrum deal is expected to close in 2015, subject to regulatory approvals. The deal has already been approved by Spectrum’s board of directors. The transaction includes 42 markets in Europe.
The consumer giant’s pet care business was witnessing declining volumes since the fourth quarter of fiscal 2013 due to the recall of dry pet food products in Mar 2013. Exiting the business will thus help P&G to focus its resources on the core business.
In fact, the Zacks Rank #3 (Hold) company regularly divests non-performing or non-core brands to enable it to concentrate on its fast growing businesses.
In Jun 2012, the company divested its snacks unit, Pringles, to Kellogg Company (K) to focus more on beauty and personal care products. In fiscal 2013, P&G divested its underperforming bleach business in Italy and Portugal and the Braun household appliances business. In 2014, P&G divested its remaining global bleach businesses. In Oct 2009, the company sold its global pharmaceuticals business to Warner Chilcott, now Actavis plc (ACT) to focus on the fast growing consumer oriented healthcare business.
In fact, over the next two years, P&G has plans to divest or discontinue 90 to 100 brands whose sales and profits have been declining over the past three years. Reportedly, the list could even include some larger brands if they do not strategically fit into the company’s core business.
The divesture of the underperforming business will help the company focus more on 70 to 80 of its biggest brands including the Billion Dollar Brands like Tide, Pampers and Oral-B which have accounted for 90% of the company’s sales and over 95% of its profits. Increased focus on these core businesses which have greater potential for growth should improve the top line.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment