By Jessica Wohl and Jessica Hall
CHICAGO/PHILADELPHIA, Nov 18 (Reuters) - Colgate-Palmolive Co shares hit a new year high on Wednesday after a report suggested that the toothpaste maker could be close to linking up with Lysol manufacturer Reckitt Benckiser Group Plc .
The Telegraph reported online that Britain's Reckitt is close to announcing a "multi-billion pound, cross-border transaction," but said it was unclear which company Reckitt was targeting.
The report said that SSL International, the British maker of Durex condoms, has long been seen as a target for Reckitt. It also said that well-placed, unidentified sourcesthought Colgate was the most obvious candidate.
Shares of Colgate jumped as high as $87.39 before ending the session up 3.7 percent at $85.87. Colgate issued a press release to say it does not comment on unusual market activity and that the New York Stock Exchange had contacted the company about its share move.
Reckitt, which closed at 3100.21 on the London Stock Exchange, also declined to comment.
"Colgate is a very attractive company given its Latin American distribution, but its similar size to Reckitt would suggest a merger is more likely than an acquisition," said Sanford Bernstein analyst Ali Dibadj, who follows Colgate.
If Reckitt and Colgate were to pursue a merger, it would mark the first major deal in the household products space since Procter & Gamble Co paid $57 billion for Gillette in 2005.
Colgate holds a 3.9 percent share of the world cosmetics and toiletry market compared to Reckitt's fractional presence, according to Euromonitor International. In household care products, Colgate holds a 3.6 percent market share, while Reckitt commands nearly 9 percent.
A SIZE ISSUE
Since Colgate and Reckitt are similar in market capitalization, an outright takeover would be difficult, said two industry sources, who declined to be identified by name.
Colgate's market capitalization is $41.2 billion, while Reckitt's is $37.1 billion.
The two companies could pursue a merger, but such an arrangement may require dual-listed stocks and dual managements, said the industry sources, who declined to be identified by name because they were not authorized to speak with the media.
A merger structure would reduce the savings normally seen in large-scale acquisitions, they said.
Investors are likely to hear more about the speculation on Thursday, when Colgate and Reckitt executives speak at a Morgan Stanley Global Consumer & Retail conference in New York that is closed to media.
Speculation of a deal with Reckitt fueled an all-out feeding frenzy in Colgate call options, according to Interactive Brokers Group equity options analyst Caitlin Duffy.
About 63,000 Colgate call options changed hands, 21 times their recent average daily turnover and more than double the amount of its put options, according to option analytics firm Trade Alert.
(Reporting by Jessica Wohl in Chicago and Jessica Hall in Philadelphia, additional reporting by Doris Frankel in Chicago, editing by Michelle Gershberg, Matthew Lewis and Leslie Gevirtz)
((jessica.wohl@thomsonreuters.com +1 312 408 8132; Reuters Messaging: jessica.wohl.reuters.com@reuters.net;)) Keywords: COLGATE/
(See http://blogs.reuters.com/shop-talk/ for Shop Talk -- Reuters' retail and consumer blog.)
COPYRIGHT
Copyright Thomson Reuters 2009. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
