P&G Faces Resistance to Wella Plans

Procter & Gamble might be left with an awkward core of minority shareholders that could complicate its plans to integrate its biggest acquisition, Wella, the German hair care group.

P&G received a boost late on Friday when Henkel, the German consumer group, said it had agreed to sell its holding of Wella ordinary and preference shares, totalling about 7% of the total share capital, to P&G. But Close Brothers, a UK investment bank, warned that a group of Wella preference shareholders it was advising was refusing to accept P&G’s tender offer.

Some holders of the non-voting preference shares have rebelled against P&G’s offer of EU65 a share. They say it discriminates against them by offering them barely two-thirds of the EU92.25 on offer to holders of the voting ordinary shares.

P&G is expected to win almost all the ordinary shares after buying nearly 78% of them from Wella’s controlling families in March. But the Close Brothers group controls about 35.5% of the non-voting preference shares, equivalent to 12.3% of total share capital.

People in the dissenters’ camp suggested that as much as 50% of Wella’s preference shares might not be tendered, meaning P&G could struggle to acquire more than 80% of the total capital.

But sources close to the deal said a number of hedge funds that had bought preference shares had decided to tender them. They accepted a guarantee from P&G that they would receive the difference if there was a squeeze-out of minority shareholders, or a so-called “domination agreement” at a higher price within 12 months.

P&G insists it can implement its business plan for Wella whatever the level of acceptances.