OREANDA-NEWS. Procter & Gamble's reported plan to divest a large chunk of its USD20bn beauty division is unlikely to attract interest from major competitors such as L'Oreal, Henkel, Unilever, Colgate and Kimberly Clark if P&G wants to offload the business in a single sale, Fitch Ratings says in a new report. But rivals would probably be interested in buying individual brands.

According to media reports, P&G intends to retain several brands, such as Pantene, that have leading shares and positive marketing momentum, and may divest the remaining assets in one lot via an IPO or sale. We estimate that the remaining assets lined up for divestment generate about USD8bn in revenues, and at a conservative 15x EBITDA multiple could cost a buyer USD13bn-15bn.

This would be a hefty price for major competitors and the USD8bn in revenues would be transformative for all but Unilever, which has roughly USD52bn total revenues (including food). The assets probably would not be earnings accretive as margins are lower than those of potential buyers, and therefore would be more likely to negatively affect the would-be buyer's existing ratings. We therefore do not think any major consumer industry companies have the capacity or willingness to engage in an acquisition of this magnitude, particularly if it is non-accretive.

We therefore believe that if the assets were divested as a single block, an IPO or a sale to a non-strategic buyer would be more likely. Unrated Coty Inc. could also be a potential buyer as it is focussed on growth and has previously been able to offer USD10.7bn for Avon Products.

We believe major rated consumer companies would be more interested in selective acquisition of P&G brands, and several could remain near current ratings if they made acquisitions with a price tag of around USD5bn. But even if buyers were able to pick and choose a group of brands the price is likely to be high, and require a meaningful level of debt financing and future cash draws for brand support and integration.