NEW YORK -- Colgate-Palmolive Co., the maker of toothpaste and Irish Spring soap, said Thursday it has agreed to acquire Mennen Co., the top U.S. manufacturer of deodorants, for $670 million.
Colgate also reported its fourth-quarter earnings rose 18 percent over the same 1990 period.
Colgate, the body care and consumer household products manufacturer, said the acquisition of Mennen, the personal care products company with headquarters in Morristown, N.J., is part of its plan to expand global operations.
The purchase will put Colgate into the No. 1 position in the U.S. deodorant market, said Greg Sigmund, an analyst at A.G. Edwards & Sons Inc. in St. Louis. He said Mennen already holds the top spot in the highly competitive deodorant market, led by such strong brands as Speed Stick for men and women.
About 80 percent of the $670 million purchase price will be payable in Colgate stock and the rest in cash, subject to regulatory approval.
Colgate's stock lost 62.5 cents to $47.75 a share Thursday on the New York Stock Exchange.
Colgate, which had annual sales of $6 billion in 1991, makes a wide range of household, personal care, laundry and pet products from Ajax to Wash 'N Dry to Hill's pet food.
Mennen, with sales of $550 million last year, is the market leader in the $1.7 billion U.S. deodorant market and in Canada. Mennen also has significant positions in the baby products and men's toiletries markets under the brands of Baby Magic, Mennen Skin Bracer and Afta.
Jay Freedman, an analyst at Kidder, Peabody and Co., said the biggest boon for Colgate is that the takeover will give the company more exposure in the personal care area, which already represents about $1 billion in annual sales for Colgate. He estimated the Mennen acquisition would boost Colgate's personal care sales by 40 percent.
'It will also significantly increase their position in the U.S. market in body care products,' Freedman said. 'And it will fit well with what they currently have in Latin America.'
Freedman said he expects Colgate to keep virtually all of the Mennen businesses.
Sigmund said he expects Colgate to sell off Mennen's paper unit, which would make the price it paid for the personal care division quite a bargain.
'Colgate paid $670 million and about $70 million of that was for Mennen's paper products division that makes party hats and party things, ' Sigmund said. 'I think they're going to sell that part of the business and they'll probably get $70 million for it.'
Thus, Sigmund said, 'Colgate paid $600 million for the personal care side of the business that has about $450 million in sales.'
Colgate's Chairman Reuben Mark said 'this strategic acquisition is important to Colgate because Mennen's market-leading brands will complement and strengthen our global personal care business. It significantly enhances Colgate's presence in the very large U.S. and Canadian markets for these products.'
Mark said Mennen's presence in Latin America and Europe, where Colgate also operates, will help the company further develop its personal care markets internationally.
'We and the family are pleased and proud that a fine company like Colgate-Palmolive has recognized the important values and strengths of Mennen,' said L. Donald Horne, chairman of Mennen.
'Colgate's greater resources will help us compete even more successfully than we have as an independent company, and we believe our well-established brands -- combined with Colgate's enormous international marketing power -- will lead to a new, even brighter future for Mennen.'
Moody's Investors Service confirmed Colgate's A2 long-term debt rating and the prime-1 rating on its commercial paper, reflecting its assessment that the Mennen takeover will improve the company's competitiveness worldwide.
Meanwhile, Colgate reported its fourth-quarter earnings jumped 18 percent to $86.9 million, or 58 cents a share, from $73.5 million, or 52 cents a share, in the year-ago period.
Sales for the fourth quarter rose 7 percent to $1.57 billion from $1. 47 billion a year earlier.
But Colgate's 1991 earnings dropped to $124.9 million, or 77 cents a share, from $321 million, or $1.28 cents a share, in 1990. Colgate said its 1991 results reflected a $243 million after-tax restructuring charge in the third quarter.
Revenues for 1991 rose to $6.06 billion from $5.69 billion in the prior year.
