P&G Moves Closer to Wella Bid

U.S. consumer goods group Procter & Gamble is ready to bid for hair care firm Wella, but is still struggling to convince the firm’s family owners to sell, a source close to the situation said on Monday, according to Reuters.

“An offer could come this week, the week after,” the source said. “But they (Wella’s owners) are still deciding whether they really want to sell the company or not. It is possible they could change their minds very quickly. Ultimately, there is a price (at which they will sell).”

P&G is under pressure to show its hand in the $6 billion race after rival suitor Henkel KGaA of Germany last week said it bought a 7% holding in Wella. Newspaper reports on Monday said Anglo-Dutch group Unilever NV/Plc is also weighing a bid.

While bankers played down the possibility of Unilever entering a bidding war for Wella, Henkel’s stake purchase is seen as a setback for P&G. Even if the U.S. group can win favour with Wella’s complex web of private shareholders, it would still have to negotiate a deal with rival Henkel to gain control of the group. Without Henkel’s stake, no bidder will be able to reach the important 95 % threshold at which level they can “squeeze out” any remaining shareholders.

“For P&G to pay up they would want some comfort they could get to 100%, the Henkel stake has complicated that is why the bid didn’t come last week,” another source said, according to Reuters.

P&G has been set on winning a deal with the German hair care group, which would make it global number one in the $35 billion hair care market, replacing France’s L’Oreal. Henkel needs Wella to secure a world-leading position in hair care and seal its transformation from a mixed chemicals and consumer goods company.

But P&G is reluctant to overpay in any bid for Wella, and a source familiar with the situation said it did not plan to pay over 90 euros per share.

Wella’s shareholders last October rejected an initial approach from Henkel, which offered some 70-80 euros a share, but a source familiar with the thinking of Wella’s controlling families said last week they were prepared to sell at between 80 and 90 euros a share, valuing Wella at around 6 billion euros.

A P&G spokeswoman declined to comment. Sources said Merrill Lynch is advising P&G while Henkel is working with Dresdner Kleinwort Wasserstein.