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Gillette in talks to sell unit
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June 1, 2000: 8:30 p.m. ET
Company plans to sell its stationery business to Newell Rubbermaid
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NEW YORK (CNNfn) - Gillette could soon sell its lagging stationery business to Newell Rubbermaid, making good on a commitment to prune segments that have failed to realize their potential.
Gillette said it is in exclusive negotiations with Newell (NWL: Research, Estimates) to sell the business, which consists of products such as Parker pens and Liquid Paper.
Eric A. Kraus, Gillette's vice president for corporate communications, said the deal would take several weeks to complete.
Gillette began a review of the long-term potential of its stationery business in October 1999.
In its annual report, Boston-based Gillette (G: Research, Estimates) pledged to, "prune, divest or discontinue any product category that doesn't clearly demonstrate the potential for acceptable rates of growth."
"We are focusing on three core businesses - grooming, oral care and portable power (batteries) - and stationery products doesn't fit with our long-term view," Kraus said.
 "These are wonderful brands, but are better suited to another company's portfolio," he added.
The stationery business is Gillette's second largest, behind its Braun grooming segment, with 1999 sales of $743 million, but it only posted a yearly profit of $18 million. In contrast, Braun had sales of $1.85 billion in the same year and earned $154 million.
In 1998, the stationery products business earned $108 million. The company attributed the decline to decreased sales, as well as to problems in production levels.
Alice Longley, analyst with Donaldson, Lufkin and Jenrette, said the writing instrument business is becoming less and less profitable.
"I know one of the issues is that the asset base is really big versus sales," Longley said. Another problem may be that customers just aren't interested in paying up for pens, she added.
In March, Gillette sold its White Rain shampoo and other value hair care products the company felt did not fit in with the company's global, premium brand strategy.
Longley said the company will next look to divest the parts of its Braun business that do not relate to grooming, such as household appliances.
Newell Rubbermaid Financial Communications Manager Victoria Gilbert said the stationery division would enhance Newell's already significant international presence with writing instruments.
"This also brings us into the high-end writing instrument category with Waterman," Gilbert said.
The company has been aggressive in increasing its international presence in writing products, acquiring German company Rotring Group in August 1998 and taking a majority stake in France's Reynolds SA in Oct. 1999.
Shares of Gillette rose 1-3/8 to 34-3/4 on the New York Stock Exchange while shares of Newell edged up 1/2 to 26-3/4. 
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