3 Most Likely Suitors For Colgate-Palmolive, In Jefferies' View

Colgate-Palmolive Company CL CEO Ian Cook recently made headlines by saying he would accept a hypothetical buyout offer for the company of $100 per share. While there are no confirmed reports of buyout discussions ongoing, the quote now has traders speculating about which companies could be interested in a Colgate-Palmolive takeover.

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3 Strong Contenders

The New York Post mentioned Unilever plc (ADR) UL, Johnson & Johnson JNJ and Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B)/3G as potential suitors. Of the three names mentioned, Johnson & Johnson is the most likely buyer, Jefferies analyst Kevin Grundy said.

“We believe JNJ is the most likely suitor, at this juncture, as we are not of the view that ULVR is likely to make an approach right away following its recent strategic announcements,” Grundy said.

Related Link: Wall Street's M&A Chatter From May 17: SiriusXM-Pandora, WebMD, Colgate, Calpine

Rumors that either Johnson & Johnson or Unilever could be interested in buying Colgate-Palmolive have been around since at least 2011.

Looking At The Numbers

A buyout of Colgate-Palmolive would result in 13–18 percent EPS accretion for Unilever and 6–8 percent EPS accretion for Johnson & Johnson, Grundy said.

Still, the buyout rumors aren’t enough to make Colgate-Palmolive a buy.

“While we are favorably predisposed to high margin, high return businesses with attractive growth profiles and M&A optionality, we remain on the sidelines given the deterioration in Colgate’s topline trends and the uncertain outlook in EMs,” Grundy said.

Instead, Church & Dwight Co., Inc CHD is the best option for investors looking to play potential consolidation in the cosmetics, household and personal care market, Grundy said.

Jefferies maintains a Hold rating and $76 price target for Colgate-Palmolive.