More Takeover Talks

You know the economy is rolling along with takeover talks takeover analysts’ musings. Yesterday, it was Procter & Gamble purchasing Beiersdorf. Today, it’s Unilever making a bid for Colgate-Palmolive.

The folks at Seeking Alpha note that Unilever aims to double its revenue within a decade and has been in a buying mood of late, acquiring Sara Lee’s European shower gel and detergents business and Alberto Culver.

Although food and beverages accounted for more than half of Unilever’s total sales in 2010 (compared to just 17% for detergents and household cleaning products), CEO Paul Polman has identified the personal care segment as the focus area for Unilever going forward—which makes Colgate an attractive target.

After all, Colgate is the global leader in oral care with close to a third of the market share in the $20 billion market for toothpaste, toothbrush, dental floss and mouthwash. A merger with Colgate would immediately strengthen Unilever’s position in the oral care market from its current market share of around 6% made up by Signal and Closeup brands.

At the same time, according to Seeking Alpha, Colgate’s Suavitel and Soupaline brands of fabric conditioners would strengthen Unilever’s fabric care offering that includes the Surf and Omo detergents brands. The merger would also expand Unilever’s soaps, shampoos and deodorants portfolio of brands.

Such a move would boost Unilever’s profitability too. Unilever’s overall EBITDA margin has fluctuated around 15% between 2005 and 2010. In contrast, Colgate-Palmolive’s EBITDA margin exceeded 25% over the same period. Further cost savings and synergies in areas such as selling, general and administrative and savings on marketing expenses would also benefit the profit margins.