Colgate buying control of Tom's of Maine for $100 million

PORTLAND, Maine (AP) _ Colgate-Palmolive Co. announced Tuesday it's buying Tom's of Maine, the leading maker of natural toothpaste, which used to tweak big toothpaste makers for putting artificial

Tuesday, March 21st 2006, 1:59 pm

By: News On 6

PORTLAND, Maine (AP) _ Colgate-Palmolive Co. announced Tuesday it's buying Tom's of Maine, the leading maker of natural toothpaste, which used to tweak big toothpaste makers for putting artificial additives like saccharin in their products.

The $100 million cash deal for privately owned Tom's of Maine, which got its start in 1970 by producing a phosphate-free laundry detergent, reflects Colgate's strategy of focusing on the higher-margin oral and personal care businesses.

But founder Tom Chappell said that neither the company's business philosophy nor its quirky toothpaste flavors like fennel, apricot and orange-mango will change.

Colgate said the purchase of 84 percent of the Kennebunk-based business is expected to close in the second quarter. The Chappell family that founded the company will keep a 16 percent stake. Colgate will have additional share purchase opportunities over the coming years.

Chappell said Tom's of Maine, with annual sales of about $50 million, will maintain its product formulas and be managed as a stand-alone subsidiary, much as Colgate's Science Diet pet food line has been. But he said Colgate's financial clout and distribution network will enable his brands to make inroads into national chain stores and grow to their full potential.

The U.S. market for so-called natural oral and personal care products is valued at $3 billion and is growing at 15 percent per year, Colgate said.

``The irony is that although we are growing in the high teens and low 20s, it's not enough to meet a demand 10 times the size,'' Chappell said in an interview. ``About 25 percent of Americans are interested in these kinds of products.''

Tom's of Maine products are distributed in Canada and the United Kingdom, but Chappell said the greatest growth opportunities are in the U.S. market.

He said his toothpaste is ``now the number six brand in America, and I think we will be number three with the help of Colgate.''

The company's operations will stay in Maine, all departments will remain intact and no jobs are being eliminated, Chappell said. ``Colgate said we do not want to see synergies at the cost of people,'' he said.

Packaging of Tom's of Maine products will not identify the company as a Colgate subsidiary, he said.

At one time, his company ran radio ads pointing out that mainstream toothpaste makers put saccharin in their toothpaste but Tom's of Maine did not. Its Web site claims that the company's products are free of artificial ingredients used by most of its competitors.

His company has long espoused a philosophy of social responsibility and environmental awareness, and longtime customers responded to news of the Colgate acquisition with mixed feelings.

``My first thought was that's consorting with the devil,'' said Linda Shary of Portland, whose family brushes with Tom's of Maine toothpaste and has used some of its other products in the past. ``But on second thought, it would be great if they could partner and start getting more socially responsible products into the Colgate line.''

Another Tom's of Maine customer, Marie Malin of Falmouth, had similar thoughts.

``It's always a little bit sad when these Maine-based companies are bought out by national companies,'' Malin said. ``But it could be a good thing because the more that American consumers know about and purchase natural and organic products, the better the world will become.''

Chappell, 63, gave up a corporate career in Philadelphia and moved to Maine with his wife in 1968 to pursue a simpler lifestyle.

Their company, founded with a $5,000 loan, focused on environmentally friendly products, the first being a phosphate-free laundry detergent called Clearlake.

The company now has 90 natural products, including toothpaste, mouthwash and deodorant, and a work force totaling about 160 at its corporate offices in Kennebunk, its production facility in Sanford and on its national sales force.

Tom's of Maine has gained a reputation for philanthropy, donating 10 percent of its pretax profits to nonprofit organizations that benefit the environment, the needy, the arts and education. It also allows employees to spend 5 percent of their paid time on volunteer work.

Reuben Mark, Colgate's chairman and CEO, said Chappell, who founded the company with his wife Kate, will stay on to lead the company.

Colgate, which makes Colgate toothpaste, Palmolive dishwashing liquid, Mennen deodorant and Irish Spring soap, expects the acquisition to be neutral to its 2006 profits and increasingly positive each year thereafter.