Under Competitive Pressures, Dial Puts Itself Up for Sale

Consumer products manufacturer Dial Corp., finding it harder to meet the stiff competition from larger rivals, announced that it is putting itself up for sale. On reason that Dial may have finally moved to market after a lengthy review of its future is that the timing of a sale has turned in its favor, say outside observers. “The board concluded that in order to maximize shareholder value and ensure that our products remain competitive in the future, the company should be part of a larger enterprise,” said Dial chairman and CEO, Herbert M. Blum. The decision follows a yearlong review of strategic options, which ruled out staying independent or looking for joint venture partners. The review indicated that competition from such consumer products giants as Proctor & Gamble Co. and Unilever NV would not allow Dial to reach its market share goals. With about $1.6 billion in annual sales, Dial concluded that it couldn’t compete effectively with larger packaged goods companies. Proctor & Gamble, for example, has reported nearly $10 billion in revenue for the most recent quarter. Dial makes Dial soap, Armour canned meats, Purex laundry detergent, and Renuzit air fresheners among other products that would be attractive to buyers. At the time of the August announcement, Baum said that there had been no serious discussions about selling the whole company, although he added that some parties had expressed interest in picking up selected assets. Baum said that the downside to piecemeal sales is that it would incur a high tax bill. One industry analyst, who re-quested anonymity, says that pros-pects for a sale are better now than they were in the last six or 12 months because the company’s retail channels are no longer “stuffed.” He refers to a practice in which companies ship more product than is actually ordered in a bid to boost short-term valuations. “Now they can offer a nice, lean packaged goods company with clean retail channels. This presents a positive structure for a potential deal because now an acquirer can get an accurate idea of earnings,” he says. Turning his attention to prospective buyers, the analyst notes that Japan’s Kao Corp., which owns soap maker Andrew Jergens Co., would be a potential acquirer. Another potential bidder is Sara Lee Corp., which makes food, household products, and underwear. He rules out Proctor & Gamble as an acquirer of some of the Dial brands because P&G tends to occupy the premium end of the business, while the Dial brands compete in the middle of the packaged goods quality spectrum. He adds that another potential U.S. acquirer, Colgate-Palmolive Co., doesn’t need even the strongest Dial brands, such as Dial soap and Purex. Most large U.S. packaged goods producers would likely face antitrust issues as well. “The Justice Department has reviewed this industry’s mergers for the most part and it tends to define packaged goods markets rather narrowly, which could cause problems for potential U.S. acquirers,” he notes.