BRAND ACQUISITIONS CREATE PRESSURE FOR MORE DEALS: AGENCIES AGAIN FACE UNCERTAINTY FROM CORPORATE CONSOLIDATIONS

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Last week's consumer-product company acquisitions could signal the beginning of a new wave in dealmaking, say industry analysts and consultants.

"Consolidation begets consolidation typically," said a Chicago investment manager, speculating that Clorox Co.'s $1.6 billion agreement to acquire Glad bag maker First Brands Corp. and Newell Co.'s $5.8 billion play for Rubbermaid could ratchet up pressure for competitors to get in on the action.

POTENTIAL TARGETS

Perennials in the rumor mill among analysts as acquisition targets are Church & Dwight Co., Reckitt & Colman, Alberto-Culver Co. and Dial Corp. In consumer durables, potential targets could include Rival Co. and Sunbeam Corp., the latter weakened by a downward restatement of earnings last week following a three-month audit resulting from the ouster of former CEO Al Dunlap.

"The combination of Newell and Rubbermaid [in consumer durables] is only going to increase awareness among players in the middle tier that they've got to get together," said William Steele, analyst with Buckingham Research Group. "This combination is going to be a juggernaut."

It's likely that agency shifts will result from the new combinations, although Robert Bolte, Clorox VP-marketing services, said the company won't consider agency assignments for a month.

Y&R Advertising and McCann-Erickson Worldwide, both New York, currently handle First Brands work. Clorox's shops are Y&R's San Francisco office and DDB Needham Worldwide, also San Francisco.

Rubbermaid is handled by Martin/Williams, Minneapolis, while Newell, maker of Rolodex office products and Goody hair products, among other brands, doesn't do much advertising. But one of its brands that is supported is Mirro-Wearever cookware, handled by Cramer-Krasselt, Milwaukee.

`2 DEFENSIBLE POSITIONS'

"There are really only two defensible positions [in package goods] -- the Procter & Gamble premium end and private label," said Mr. Steele. "Everything in the middle should be consolidated."

On the other hand, small and midsize brands have been strong players in some categories. Georgia-Pacific Corp.'s Angel Soft in bath tissue, Playtex in tampons and upstart Automation's Clean Shower in bathroom cleaners have registered gains against much bigger foes in the past year, according to a report from PaineWebber.

But several factors still favor consolidation. Declining stock prices for many consumer products companies have created opportunities for deals that had become too pricey for some, analysts said.

Also, continued consolidation in the retail sector, evidenced most recently by Safeway's proposed buyout of Dominick's Finer Foods and Kroger Co.'s proposed acquisition of Fred Meyer Inc., favors bigger consumer goods marketers long term.

WALL STREET PRESSURE

"Not only are retailers going to put pressure on people to combine, but I think Wall Street is going to pressure small companies to combine to increase efficiencies and margins," Mr. Steele said.

"Some of the companies [being acquired] are in some marketing or financial trouble, or they keep missing [analysts] estimates, and it just makes sense to sell," said Constance Meanty, analyst with Bear, Stearns & Co.

But it's not just companies facing difficulty that could be targets, said Amy Low Chasen, analyst with Goldman Sachs, citing Dial Corp.'s recent acquisition of Sarah Michaels, a small but fast-growing brand in bath and body products.

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