Kilts will retire in fall, fulfilling lucrative pay pact with P&G

James M. Kilts , the Gillette chief executive who orchestrated the sale of the century-old Boston shaving firm to Procter & Gamble Co., will retire in October, fulfilling a lucrative agreement to stay at the newly combined company for one year.

Kilts, 58, is giving up his current duties as head of the Gillette business unit in July to focus on the integration of Gillette with the Cincinnati consumer-products giant. He will keep his position as vice chairman of P&G until his departure this fall, exactly one year after regulators approved the $53 billion deal. Staying a year helps ensure Kilts's $165 million compensation package related to the acquisition.

Mark M. Leckie, 52, currently president-global of Duracell and Braun, is assuming Kilts's day-to-day responsibilities as president of the Gillette global business unit, which focuses on blades and razors. Leckie joined Gillette in 2001 as president of Duracell batteries and previously served as chief executive of Heinz Canada, and in executive positions at Campbell Soup Co., Nabisco Brands Inc., and Kraft Foods -- where he worked with Kilts.

Kilts and Leckie were not available for comment yesterday.

The moves come as some analysts note that the integration is proving more difficult than expected, with retailers cutting back on inventory and softer international sales.

``We think the Gillette integration has been more of a strain on management and on the organization than the market first anticipated," Lauren R. Lieberman , a Lehman Brothers analyst, wrote in a report last week.

AG Edwards analyst Jason Gere added that Kilts's retirement shouldn't come as a surprise.

``To focus on the integration now, he's probably making sure before he leaves the company it is in the best condition it can be," Gere said. ``He does have a financial stake in this, after all."

Kilts, known as one of the world's top turnaround specialists, has received criticism for selling the landmark Boston blades business and for his hefty compensation package related to the sale. By staying until his planned retirement date of Oct. 1, Kilts will receive 1 million P&G stock options, worth an estimated $15 million, based on the price of P&G stock when the deal was reported Jan. 27, 2005. Half the options will vest on the first anniversary of the merger completion, and the rest will vest one year later.

On the last day of his one-year post-merger employment, Kilts will also receive 150,000 shares of P&G stock, valued at $8.2 million, based on yesterday's closing price. Those shares will vest three years from the time Kilts departs from P&G, provided he complies with a noncompete clause.

To critics, Kilts was an absentee CEO when he came on board in 2001, commuting from his home in Rye, N.Y. He also was known as an aggressive cost-cutter, presiding over thousands of job cuts, first at Nabisco, then at Gillette, while reaping millions for himself. In an interview with the Globe last year, Kilts said he makes ``no apologies" for his compensation package, explaining that Gillette is worth nearly $20 billion more under his helm.

The P&G takeover has created one of the world's largest consumer products conglomerates, one that marries Gillette's blades and razors with P&G's Tide detergent and Pampers diapers. The deal is expected to result in an estimated 5,000 job cuts from a combined workforce of 140,000, with Gillette's corporate headquarters at the Prudential Tower slated to take a big hit.

This week, P&G also said it planned to close one of Gillette's two packaging plants at the former Devens military base by the end of the year and eliminate at least 100 jobs.

But yesterday, the Merrimack Valley Project, a coalition of church and labor organizations that has called for improved working conditions at the plants, disputed those numbers, saying that as many as 400 jobs could be eliminated, based on figures Gillette provided to the group last year.

Gillette spokesman Eric Kraus said job numbers at the packaging plant can fluctuate, but on average, there are 100 temporary positions.

Jake Dollarhide , whose firm, Longbow Asset Management, oversees about 20,000 P&G shares, said Gillette made it through one of the toughest periods of its existence because of Kilts. In the first 18 months on the job, Kilts cut about 3,700 jobs worldwide, closed six plants, and reduced debt by $1 billion.

``He was very successful at taking Gillette to the next level," Dollarhide said. ``A lot of people underestimated how good he could and would be."

So, what's next for Kilts?

Kilts has not commented on his plans, said spokesman Kraus. But there's plenty of speculation.

David Hardie , managing director for the executive search firm Herbert Mines Associates, in New York, said Kilts will probably lead some other consumer-driven company, such as the Coca-Cola Co.

Kilts, who was a leading candidate in 2004 for the top job and was approached about joining Coke's board of directors this year. Kilts sits on several boards, including that of The New York Times Co., which owns The Boston Globe.

``He's clearly going to end up as a chief executive of some major other company," Hardie said. ``I'd be shocked if Jim goes to sit on a beach someplace."

Jenn Abelson can be reached at abelson@globe.com.