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Procter & Gamble Pulls Out Of Billie Takeover Bid As Regulator Steps In

Procter & Gamble has decided to pull out of a deal to buy Billie, a supplier of women’s razors and body care products, after US regulators sought to block the proposed takeover. Shares rose 1.4%.

The decision comes after the US Federal Trade Commission (FTC) on Dec. 8, voted to file a complaint to seek a temporary restraining order and preliminary injunction in federal court to stop Procter & Gamble’s (PG) takeover proposal, which was first announced in January.

The FTC argued that the acquisition would allow Procter & Gamble, which has a dominant position as a supplier of both women’s and men’s wet shave razors, to kill growing competition from Billie. The deal was announced just over two years after Billie’s products came to market but after it had already seen significant sales growth, the FTC said.

“We were disappointed by the FTC’s decision and maintain there was exciting potential in combining Billie with P&G to better serve more consumers around the world,” the companies said in a joint statement. “However, after due consideration, we have mutually agreed that it is in both companies’ best interests not to engage in a prolonged legal challenge, but instead to terminate our agreement and refocus our resources on other business priorities.”

Procter & Gamble is a consumer product maker, which is best known for its brands like Tide, Gillette, Head & Shoulders, Pantene, Ariel and Pampers. Billie is a subscription-based consumer brand, which provides shaving supplies and body care products, such as razors, shaving cream, body wash and body lotion.

“Procter & Gamble’s abandonment of the acquisition of Billie is good news for consumers who value low prices, quality, and innovation. Billie is a direct-to-consumer company whose advertising targets customers who are tired of paying more for comparable razors. The FTC voted to challenge this merger because it would have eliminated dynamic competition from Billie,” the FTC stated.

In a bullish note, Wells Fargo analyst Christopher Carey last month initiated coverage on PG stock with a Buy rating and a $160 price target (15% upside potential), arguing that Wall Street’s outlook is too conservative if the current momentum is sustained.

Carey believes that strong US growth will help the company yield higher margins, positive cash flow and EPS growth. Taking all of this into consideration, the analyst sees room for “significant earnings flexibility,” which in turn means that P&G could be in a position to return additional cash to shareholders, possibly through share repurchases. (See PG stock analysis on TipRanks).

Currently, the rest of the Street is cautiously optimistic on the stock with a Moderate Buy analyst consensus. That’s based on 8 Buys versus 4 Holds. With shares up around 13% over the past year, the average price target of $157.58 implies further upside potential of about 12% to current levels.

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