Paper Tigers Consider Merging $7 Billion Deal Would Join Kimberly-Clark, Scott

Mr. Whipple never squeezed the Charmin like this.

Kimberly-Clark Corp. and Scott Paper Co. reportedly are discussing a $7 billion merger that would create a formidable global force in household basics ranging from napkins to toilet tissue, threatening the market share of Procter & Gamble Co., which sells Charmin and other well-known products.

“It would really create a powerhouse in the consumer products area,” said Evadna Lynn, an analyst at Dean Witter Reynolds. “I think it would be a win-win situation for both sets of stockholders.”

The Wall Street Journal reported in Friday’s editions that the companies were discussing a taxfree merger in which Scott shareholders would exchange their stock for Kimberly-Clark shares of equal value. Scott now has $7 billion in shares outstanding.

Current Kimberly-Clark shareholders would own 60 percent of the combined company, which would have $11 billion in revenue, the newspaper said. But the Journal cited unnamed people familiar with the situation who cautioned that the talks could easily break down.

In trading Friday on the New York Stock Exchange, Kimberly-Clark shares rose $2.25 to $62.50 and Scott Paper moved ahead $1.125 to $48.

Both companies declined to comment, and several analysts said they had heard only rumors beyond the newspaper report.

They agreed, however, that the companies would make an excellent match, both in product mix and geographical strengths.

“I think it’s a dream marriage, it’s really a great combination,” said Brown Brothers Harriman analyst Kathryn McAuley, who upgraded her recommendation on Kimberly-Clark on Friday to “buy” from “hold.” “They fit each other like a glove.”

The move would significantly strengthen Kimberly-Clark in Europe, where it has struggled but Scott is strong, she said. “As I see it, in one fell swoop they solve Europe,” McAuley said.

However, some analysts questioned whether the deal could raise antitrust concerns.

“Do they care if two big giants in a very similar business get together or not? I don’t know,” said Argus Research Corp. analyst Cornelius Sewell.