P&G Buys Majority of Germany’s Wella

Procter & Gamble Co. has signed an agreement with the founding Stroeher family shareholders of Wella AG to acquire 77.6% of their common shares, the German hair-care company said Tuesday. This represents 50.7% of Wella’s total share capital, and amounts to an overall payment of 3.2 billion euros ($3.40 billion), or 92.25 euros a voting share.

P&G, fulfilling its monthslong quest to acquire a major European cosmetics business, is set to clinch a deal to acquire Wella for roughly $5.9 billion, people familiar with the matter told Tuesday’s Wall Street Journal. Under German law, P&G is required to bid for the rest of the shares not controlled by the family.

P&G also said Tuesday that it would launch a public tender bid for the remaining common shares, paying minorities a similar price of 92.25 euros. P&G said it will also offer 61.50 euros a preferred share. P&G’s efforts for the remaining common shares could encounter resistance from rival Henkel AG, which said last week it had acquired a 6.86% stake in Wella. Henkel has long coveted Wella, but the hair care company has resisted its overtures.

Wella management defended its belief that the company could further demonstrate strong growth were it to remain independent. Until antitrust authorities grant their approval of the deal and the shares are then transferred to P&G, management said there will be no major changes in the running of Wella’s operations.

“We will continue to implement our (growth) strategy 2005 and pursue our internal targets,” Wella chief executive Heiner Guertler said.

A deal would cement P&G’s position as a leading beauty company and heighten its growing rivalry with L’Oreal SA, the world’s biggest beauty company. P&G already owns beauty brands such as Cover Girl, Max Factor and Pantene. But the company, which acquired Clairol in 2001, has been looking to expand its position in Europe.

For P&G, persuading reluctant family members to sell has been a delicate process. The Stroeher family has been coy about selling its stake, and P&G has made repeated attempts to woo the family on a host of issues, including price. A Wella deal would give P&G a major foothold in an area where the Cincinnati consumer-products titan has so far been absent: beauty salons in Europe.

Wella is well-known for its professional hair color brands like Sebastian and Graham Webb International, as well as its flagship Wella brand. The company is the second largest professional hair color company in Europe, with 24% of the European market, behind L’Oreal, with 29%, according to estimates by Goldman Sachs.

A deal with Wella would cap months of speculation about P&G and a possible beauty deal. As early as last summer, the market has been preparing for P&G to make a big acquisition in Europe. At that time, the company was talking to another German beauty company, Beiersdorf AG, which makes Nivea skincare products, but those talks stalled because of a disagreement between Beiersdorf’s two main shareholders.