Petition of the Procter & Gamble Company for Approval of Proposed Divestiture

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Petition of the Procter & Gamble Company for Approval of Proposed Divestiture PUBLIC RECORD VERSION UNITED STATES OF AMERICA BEFÖRE FEDERAL TRADE COMMISSION COMMISSIONERS: Deborah Platt Majoras, Chairman Pamela Jones Harbour Jon Leibowitz Wiliam E. Kovacic J. Thomas Rosch ) In the Matter of ) ) THEa corporation;PROCTER & GAMBLE COMPANY, ) ) ) Docket No. C-4151 and ) File No. 051-0115 ) THE GILLETTE COMPANY, ) a corporation., ) ) ) PETITION OF THE PROCTER & GAMBLE COMPANY FOR 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 the Commission to assess this Petition, and a redacted version that excludes confidential and proprietary information for placement 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 becömes 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, Decèmber 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 the Transaction 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 To Operate the Business Successfully, as Henkel and Dial Are Established and Integrated 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 corporate headquarters is located in DUsseldorf, Germany. 3 A copy of Henkel's 2005 Annual Report, issued February 14,2006, is attached as Exhibit B to this Petition. Henkel's quarterly and annual reports are available online at htt://financialreports.henkel.com. 5 '... PUBLIC RECORD VERSION Henkel has been committed to the personal care business since its founding in 1876 by Fritz Henkel in Düsseldorf, Germany. Henkel is one of the top-ten producers worldwide in cosmetics and toiletries with such brands as Fa, Vision, Diadermine, Taft, Schwarzkopf, and Dep, and holds the number three market position worldwide in the detergents and household cleaners market, with brands such as Persil, Dixan, Vernel, and Bref.
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