P&G's new pet project: $2.3 bil purchase of Iams

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In a surprise move, Procter & Gamble Co., Cincinnati, said it will acquire privately held Iams Co., Dayton, Ohio, in a $2.3 billion deal, giving P&G its first foothold in pet nutrition. Iams' $800 million in global sales comes through pet specialty stores, and the company's superpremium Iams and Eukanuba brands have little or no presence in supermarkets or mass merchandise outlets, which are P&G's primary distribution channels. A major P&G rival, Colgate-Palmolive Co., New York, already operates in this niche with its Hill's and Science Diet brands. P&G said it sees significant international growth potential for the business, now in 77 countries.

The purchase comes as Iams is in the midst of a review for its $15 million North American account. Doner, Southfield, Mich., is the incumbent.

"The review will continue. We will participate in the review, and we're open," said Bruce Byrnes, president of P&G's Healthcare & Corporate New Ventures Global Business Unit, where Iams will be housed. A consultant is handling the Iams review, a tactic not used by P&G.

The deal might open the door for one of P&G's roster shops to pick up the account. Two of them, however, appear to have conflicts. D'Arcy Masius Benton & Bowles' St. Louis office handles Mars Inc.'s Whiskas cat food brand, while Grey Advertising, New York, handles its Pedigree brand. That would leave P&G's other major shops, Saatchi & Saatchi, New York, and Leo Burnett USA, Chicago.

Copyright August 1999, Crain Communications Inc.

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