Scott Paper in talks

June 24, 1995|By Bloomberg Business News

DALLAS -- Scott Paper Co. is in talks to be sold to Kimberly-Clark Corp. in a stock swap valued at about $7.1 billion that would create the second-largest U.S. consumer products company, an executive close to the situation said yesterday.

Combined, Scott Paper, maker of Cottonelle toilet tissue, and Kimberly-Clark, which makes Kleenex tissues and Huggies disposable diapers, would generate more than $11 billion in revenue, giving No. 1 Procter & Gamble Co. a much stronger global competitor.

The talks confirm months of speculation that Scott Paper Chairman and Chief Executive Albert Dunlap, who has a reputation for stripping companies and selling them off, has put the Philadelphia-based company up for sale after 14 months on the job. He hasn't denied the possibility.

"Everything in the world, other than your family and your dogs, is up for sale at the right price," he has repeatedly told reporters.

In trading on the New York Stock Exchange, Kimberly-Clark shares rose $2.25, to $62.50, and Scott Paper moved ahead $1.125, to $48.

Both companies declined to comment.

The acquisition of Scott Paper would give Dallas-based Kimberly-Clark a long-desired foothold in Europe. "In Europe, Scott Paper is No. 1," said Evadna Lynn, a forest-products analyst at Dean Witter Reynolds. "Kimberly-Clark has had a tough time trying to break into that market."

The marketing approaches of the two companies complement each other as well. Scott Paper takes the value-added approach, while Kimberly-Clark is the premium-oriented product line, she said. The combined company would face a "definite hurdle in the and Europe in antitrust issues," Ms. Lynn said.

A combined company could have U.S. market shares of more than 50 percent in facial tissue, most of that from Kimberly-Clark's 45 percent share; 30 percent in bathroom tissue, mostly from Scott's 25 percent share, and a significant share of the baby wipe market, analysts said.

An acquisition could boost Kimberly-Clark's 1994 revenue of $7.36 billion by almost 50 percent, and most of the new revenue would be in consumer products.

The details of the talks were first reported in yesterday's Wall Street Journal, which cited "people familiar with the situation."

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