Procter & Gamble Takes Over Wella

U.S. consumer goods giant Procter & Gamble announced on Tuesday that it has struck a deal to pay €3.4 billion ($3.6 billion) in cash to the family shareholders in German hair care company Wella for 77.6 percent of the voting shares.

Proctor & Gamble sources said an offer to buy out other stockholders would bring its share purchase to €5.4 billion. It would also assume Wella's debt of 1.1 billion euros. Shareholders may have the opportunity to exchange their Wella stocks for P&G stocks, the company added.

"Wella's strength in Europe complements P&G's strength in North America," Procter & Gamble CEO A.G. Lafley announced in a press release. P&G expects that it will break even on the transaction within one year.

Disappointment from Wella

Wella's executive board expressed disappointment with the deal, which it said it only learned of the agreement on Tuesday morning. CEO Heiner Gürtler said the board was particularly disappointed by the "strong difference" between P&G's offer for the voting and preference shares.

Procter & Gamble said it would pay €92.25 for each Wella common share, and €61.50 for each preferred share.

In a press release, the board dubbed the take-over an "unnecessary step" in the light of "clearly defined growth targets through 2005," emphazing that the "question of a sale (on the part of the family shareholders) is beyond the Executive Board's sphere of influence."

P&G's acquisition will not be final until it is approved by EU and U.S. anti-trust authorities. CEO Gürtler expressed his opinion that the authorities would approve the transaction.

Based in Darmstadt, Wella is the world's second biggest supplier of hair care products after the French giant L'Oreal. It maintains close relations to hair care professionals as well as providing retail customers with its products in 150 countries. The company branched out in recent years to sell perfume for men and women, with licenses for brands such as Hugo Boss, Gucci and Escada.

Last year Wella had a total turnover of €3.4 billion, an increase of 6.4 percent over the previous year, according to Gürtler.

Stock activity

Wella's voting shares, which stood at €75.50 before news of the sale was released, shot up by more than 20 percent to €90.70, while the preference shares went up by 3.5 percent, to €63.50, on the German Stock Exchange Midcap Index.

German consumer goods company Henkel had previously expressed interest in buying a major share in Wella and acquired 6.86 percent of the company's shares last week. Since the announcement of the P&G take-over, Henkel's stocks have increased in value by 10 percent. A Henkel spokesperson told Reuters news agency the company would not get involved in a costly bidding war with P&G but left open whether it would sell its newly-acquired shares.

In France, L'Oreal, saw its shares drop on Tuesday attributed to assumptions that P&G would intensify Wella's efforts to overtake its biggest competition.

In family hands

Franz Ströher founded Wella in 1880. The company has remained mainly in family possession since then. The four families are made up of more than 100 people. In the past family members often had disagreements on the sale of shares. They subsequently signed an agreement that their stocks would only be sold as one package and made it known that they were interested in selling last year.

P&G, also formerly a family firm, had a turnover of €37.9 billion in 2002 and made profits of €4 billion.