Secretary Galvin Releases Critical Expert Report On Gillette-Procter & Gamble Merger

Secretary of the Commonwealth William F. Galvin today released to the public an expert report on the fairness opinions issued on the proposed merger of Gillette Corp. and Procter & Gamble. The report called into question the value of the merger. It states that the share price offered seems to benefit P&G shareholders at the expense of Gillette shareholders.

“I am making this report available today so that investors will have access to it before they vote on the merger next month,” Secretary Galvin said. “Investors, especially Gillette shareholders, both institutional and small investors, should read this. It offers a cautionary second look at the share price offered in connection with the merger. Shareholders need to consider whether the share price offered is fair to them from a financial point of view.”

The Securities Division of the Secretary’s office is conducting an investigation into the fairness opinions issued to Gillette by Goldman, Sachs and UBS.

In March, the Securities Division asked Rajesh K. Aggarwal, associate professor of commerce at the University of Virginia, to look at the fairness opinions and the value of the proposed merger that they reflected.

Prof. Aggarwal’s report will be available on the Secretary’s website www.sec.state.ma.us. Those with questions about the report or the proposed merger and wish to obtain a printed copy of the report can call the Securities Division toll-free telephone line at 1-800-269-5428.

Prof. Aggarwal found that internal company documents estimate the revenue and cost synergies from the merger at between $22 and $28 billion, while public statements placed those same cost synergies at between $14 and $16 billion. He also found errors in calculations of the merger synergies.

Prof. Aggarwal concluded that these discrepancies and errors underestimate the value of the merger. “Both of these issues would benefit P&G shareholders at the expense of Gillette shareholders,” he wrote.

Expert Report (PDF, 110k)