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Colgate Palmolive (NYSE:CL) is the next likely consumer products company that will get a takeover offer. There have been rumors recently that Reckitt Benckiser, based in the UK, might be the acquirer, but the firm does not have a large enough market cap.

Colgate has a $42 billion market cap. The company had $4 billion in revenue last quarter and $926 million in operating income. Colgate’s long-term debt is a modest $2.9 billion.

The single most likely buyer of Colgate is Procter & Gamble (NYSE:PG). Its market cap is $312 billion. The two company’s lines of consumer products could be operated with a much lower G&A costs and marketing budgets if they were under one roof. The savings are likely to be in the hundreds of millions of dollars a year. P&G’s purchase of Gillette for $52 billion in 2005 was a substantial success and the integration was viewed as largely without incident. It would be the nearly perfect template for a Colgate merger.

The one issue that could undermine a move by P&G is whether antitrust officials in the US or EU would look at the combined operation as having too large a piece of some consumer products market. The EU is more likely to block a deal than US regulators, if history is any guide. But, P&G could divest some of the potential P&G/Colgate businesses if they got in the way of a Colgate purchase.

Douglas A. McIntyre