Crossing Wall Street Turns Four

Happy fourth birthday to Crossing Wall Street! This is my 4,289th post.
Here’s my very first:

Europe Vs. Gillette and P&G
The European Constitution finally ended its nasty losing streak yesterday when it was approved by voters in Luxembourg. Even if the good people of the Grand Duchy had voted against the referendum, the Eurocrats don’t seem terribly interested in losses at the polls. The Constitution is quite popular as long as no one actually has to vote on it. That’s why the Luxembourgian Yes vote (or Jo vote?) is so important. It keeps “the process” alive. And that’s the important thing—the process. The Constitution has already been shot down by voters in Holland and France, yet the EU leaders insist that “the process” continues, which I take to mean as “vote until you get it right.”
However, there’s another election coming this Tuesday that might similarly be ignored by the Brussels Busybodies. In Boston, Gillette’s shareholders will meet to vote to approve their merger with Procter & Gamble. The deal will almost certainly be approved. Warren Buffett, Gillette’s largest shareholder, has called it a “dream deal.” That’s a nice endorsement to have.
But the merger has hit an unexpected snag—the EU doesn’t like it. Now let’s recount the action: We have two U.S.-based businesses agreeing to a friendly merger. The deal has been approved by U.S. regulators, and it will certainly be approved by shareholders. But the regulars in another country (or entity, at least) object. And what’s the sticking point?
Toothbrushes.
I’m not making this up. Gillette owns the Oral-B brand of battery-powered toothbrushes, and P&G has its own Crest brand. The EU thinks that if the two are combined, the new cowboy superpower will have a competition-stifling command of the global toothbrush market. Think of the horror. Across the continent, mom-and-pop toothbrush makers will be driven out of business by uncouth Americans. Oral care has generally not been a major concern for Europeans, so I guess this is progress of some sort, but it’s a disturbing trend nonetheless.
This isn’t the first time Europe has interfered with American business. As the economy has gone global, so have the bureaucrats. Four years ago, the EU blocked General Electric’s merger with Honeywell. But the issue there was at least something cool, aircrafts. But toothbrushes?
If you had to sum up the pettiness of the European bureaucracy, this would be as good as any. But this is what the Global Economy looks like. Gillette and P&G will have no problem finishing their merger. The Europeans might delay it for a while, and the companies will probably have to sell off some units. But now, every time two businesses even think about merging, they’ll have to consider what might happen in Brussels, not to mention, Luxembourg.

Posted by on July 11th, 2009 at 5:58 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.