Colgate-Palmolive Company (NYSE:CL) defied odds to rise 1.3% in the market to trade at $66.23, following reports that the company is exploring merger. This marks the company’s highest since July this year. The $60 billion company is among many other household product producers faced with stiff competition in the highly dynamic market.
The idea of Colgate-Palmolive Company (NYSE:CL) being a takeover target isn’t unlikely though. The year has been marked with megamergers that have seen over $20 billion companies opting for merger.
Colgate-Palmolive Company (NYSE:CL) has developed a robust network across the globe. It offers mega supplies to developing nations that currently account for 50% of its total sales. With the demand for oral-care products growing very fast in the developing world, Colgate-Palmolive Company (NYSE:CL) has a huge advantage of leveraging its massive network to extend its growth even further. Without a doubt, Colgate has a greater growth potential than its main competitors in the oral-care segment such as J&J and Unilever.
Acquiring Colgate-Palmolive Company (NYSE:CL) would be a good bet for its competitors, especially companies that are keen on capturing the fast growing middle class in China, Africa, and India. The company’s network would offer a ready platform to reach out to the masses.
“If I were a Unilever or somebody, I’d look longingly at Colgate,” Luke Sims, chairman of Milwaukee-based Sims Capital Management LLC, which owns Colgate stock, said. “I don’t think you could find a better managed company. It’s very desirable.”
Analysts from ING Groep NV has earlier this year lashed out at Unilever, saying that the company can make good use of its “lazy” balance sheet and even went ahead to suggest that the company buys Unilever.
Owing to the company’s long term growth potential, some analysts say that it shouldn’t go for a value below $90 a share, which is 39% higher than the average price the stock registered in the last 20 days.
If such an acquisition goes through, it would go beyond the $57 billion that Procter & Gamble Co. paid for the purchase of Gillette Co. in 2005, which marked the largest deal in the household-products and cosmetics industry.
This article has been written by Victor Ochieng.