German household-products conglomerate Henkel announced Monday morning that it will acquire Dial (NYSE:DL) for $2.9 billion. At $28.75 per share, the all-cash deal represents an 11% premium to Dial's close last Friday.

Henkel, best known in North America for its Persil detergent brand, gains Dial's leading brand of deodorant soaps, as well as Purex laundry detergent. All told, Dial's $1.3 billion in sales will roughly double Henkel's North American output, as the merged company competes with much larger rivals Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL) and Unilever (NYSE:UL).

Henkel said it would finance the deal by eventually selling off a portion of its stakes in Clorox (NYSE:CLX) and Ecolabs (NYSE:ECL), which total approximately $5 billion.

Back in August, Matt Richey put Dial through the Rule Maker test. Citing its strong brands and "best-of-class management," Matt concluded that Dial was cheap at 10.8 times free cash flow, or what was then $19.76 per share. While Matt looks to have been right about the price, I'd contest Dial's status as a Rule Maker.

In fact, Dial shareholders may have been bailed out here, especially given that one customer -- Wal-Mart (NYSE:WMT) -- controls over a quarter of Dial's sales. The rate at which Wal-Mart is pushing out its competitors and eliminating Dial's customers might eventually give Wal-Mart the power to turn Dial on and off.

Nevertheless, CEO Herbert Baum deserves a tremendous amount of credit for his part in turning Dial around since August 2000 and for developing the relationship with Wal-Mart in the first place. Now, Dial should benefit from the stability of being part of a larger conglomerate.

Was Dial necessarily headed for trouble? No, but that doesn't even really matter now: Investors who were holding Dial back in August are being cashed out at a 40% gain.

Discuss the deal on the Dial discussion board. Only on

Jeff Hwang can be reached at