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"Kimberly-Clark will get a boost in the European market from its newest acquisition."
The Post Crescent
Appleton, Wisconsin
July 17, 1995
By David Horst
Post-Crescent staff writer
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The stock market praised Kimberly-Clark Corp.'s announcement today that it will acquire Scott Paper Co. by pushing its stock price up more than $5 a share by midmorning.
Under a definitive merger agreement approved unanimously by the board of directors of both companies and announced this morning, Scott shareholders will receive .765 shares of K-C common stock for each share of Scott's common stock in a deal worth $6.8 billion.
Trading of the two companies on the New York Stock Exchange was delayed until 10:52 a.m. Eastern time. Within minutes, 1.2 million shares of K-C changed hands with the price rising to $63.75 per share.
Scott also saw heavy trading, but its price quickly dropped nearly two points to $47.25 because the stock exchange offer is lower than the Friday close of the two companies would dictate.
The deal unites the maker of Kleenex tissue, Kotex feminine products, and Huggies diapers with the manufacturer of Scott and Cottonelle tissue products into a global consumer products company with almost $11 billion in revenues.
It gives K-C a stronger presence in Europe, a bigger position in the toilet tissue market and more strength to compete against the larger Procter & Gamble Co.
Analysts said the combination offers good synergies and a few areas of overlap.
Scott has a strong presence in the paper towel and bathroom tissue markets, particularly for commercial and industrial customers, that K-C lacks. It has no diaper or feminine care products, strong areas for K-C. They run about even in sales of baby wipes.
Stephen Keane, analyst for Robert W. Baird & Co. in Milwaukee, said the merger is a logical step for K-C because it has been striving to increase its sales internationally.
"This gives them a leg up in Europe," Kean said. Scott already has a strong presence in Europe, deriving one-third of its revenues there. That would give K-C a ready-made distribution network for the diaper and training pants products it wants to sell there.
According to a joint press release today, the merger is expected to generate immediate cost savings that will grow to nearly $400 million annually by the end of 1998 by eliminating redundant overhead costs, consolidating workforces and streamlining manufacturing facilities.
K-C has extensive operations in the Fox Cities, with about 7,000 employees in Wisconsin. Scott operates a tissue mill in Marinette and a deinking plant in Oconto Falls, both of which have seen workforce cutbacks in recent years. Scott recently sold a converting plant in Oshkosh as part of $2 billion in assets sold to deal with low profits.
Keane said it is too early to tell whether any Wisconsin operations will be affected by the resulting savings measures. He said duplications in corporate headquarters, marketing forces and research and development are likely targets.
The deal, subject to regulatory approvals and votes of both companies' shareholders, is expected to close late this year.
The combined company will keep the Kimberly-Clark name. Wayne R. Sanders, chairman and chief executive officer of Dallas-based K-C, will hold the same titles in the combined company.
Albert J. Dunlap, chairman and chief executive officer of Philadelphia-based Scott, will resign and serve as an adviser to Kimberly-Clark'' board. Three Scott directors will be added to K-C'' board, taking it to 15 members.
"Together, the companies will be positioned to achieve strong sales and earnings growth, realize major cost efficiencies and compete even more effectively on a global basis," Sanders said.
Scott shareholders will gain the quarterly dividend of 45 cents per share K-C currently pays, compared to the 10 cents per share Scott pays.
To complete the merger, K-C will issue 116 million new shares, adding to its current 160.4 million outstanding shares.
Kimberly-Clark, with 1994 consolidated sales of $7.4 billion, manufactures well-known consumer products including Huggies diapers, Kleenex facial and bathroom tissue, Kotex and New Freedom feminine care products, Hi-Dri household towels and Depend and Poise incontinence care products.
Scott, with 1994 revenues of $3.6 billion, is the world's largest producer of sanitary tissue products, including Scott and Cottonelle bathroom tissue, Scott and Viva towels, Scotties facial tissue, Scott and Viva napkins and Baby Fresh and Wash-a-Bye Baby baby wipes.
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