Colgate-Palmolive to acquire Unilever, highly unlikely scenario

The international markets are abuzz over the reported rumours that New York based Colgate Palmolive may acquire the Anglo-Dutch FMCG giant Unilever. Other possible scenarios are merger of the two giants or Unilever taking over Colgate Palmolive. 

Unilever has a market capitalisation of $103 billion thrice the market cap of Colgate which is $34 billion. Even Unilever’s annual sales are $50 billion which is four times Colgate’s sales of $13 billion. So in most likelihood Unilver would acquire Colgate rather than the other way round. 

From the Indian perspective, if this consolidation happens, it will be a win-win situation for both companies. The merger will create a Rs.14,000 crore conglomerate having  60% market share in toothpaste segment alone. In India Colgate is 100% oral care co while HUL generates 10-15% revenue from oral care.

HUL’s market cap is Rs 44,669 crore while Colgate’s is Rs 5,188.70 crore. The shareholders will benefit owing to better margins post consolidation as both companies have strong market positions in their segments.

Colgate could gain from acquiring Unilever as it could have a wider portfolio and keep part of it and spin the rest reaping in extra profits. It would also be a positive for Unilever as it had been reporting lacklustre results for past many quarters.

The global merger could be beneficial for both companies as there isn’t too much product overlap between the two and together they can compete with global leader Procter & Gamble.