L'OREAL, MAYBELLINE COMBO MAKES STRONGER P&G RIVAL;$760 MILLION BID STILL NEEDS FINAL COMPETITION OK FROM JUSTICE

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L'Oreal's $760 million bid for Maybelline makes this acquisition all but a done deal.

A combined L'Oreal and Maybelline is seen as preferable to that of a match between Maybelline and Joh. A. Benckiser, which last week apparently withdrew from the bidding war it started.

"They have complementary products and there would be greater distribution and manufacturing savings," said William Steele, analyst at Dean Witter Reynolds, referring to the companies' combined mass-market cosmetics operations, which would generate sales of about $650 million.

A POTENT COMBO

He also noted that together Maybelline and L'Oreal-with its resources for research and development as well as marketing-would be stronger competition for Procter & Gamble Co.

For the first nine months of 1995, Maybelline spent $40.4 million on media, according to Competitive Media Reporting, via Gotham, New York. That figure is down slightly from $41.5 million for the same period in 1994.

It will need to spend more to compete against P&G as the No. 1 cosmetics marketer works aggressively to strengthen its business.

Industry consultant Allan Mottus also finds a L'Oreal-owned Maybelline the most attractive combination, but noted the U.S. Department of Justice must review the pending deal.

JUSTICE DEPT. CONCERNS

Analysts said Justice has lingering concerns about what is called the "concentration ratio."

The agency's concerns "reflect the high degree of consolidation in the cosmetics industry," said Mr. Mottus.

"The Justice Department is not concerned about the [43%] U.S. market share that a combined L'Oreal and Maybelline would have in the eye makeup category or that the two would have 28% of the total cosmetics category," said Mr. Steele.

"Its concern is that with such an acquisition, the three top companies [P&G, L'Oreal and Revlon] would control 85% of the total [$2.2 billion] mass makeup category," he said.

Last week, a Justice spokeswoman said there's no timetable for concluding its investigation.

LOOKING FOR COMMENTS

According to industry executives, Justice has expanded its solicitation of comment beyond Maybelline and L'Oreal rivals-including Revlon, P&G and Elizabeth Arden-by seeking opinions about the deal from a wide range of industry observers.

Benckiser, which tried to outbid L'Oreal, has left the door open. In a statement, the company said: "We're not interested in offering more than $44 a share at this time. We will continue to review the situation, especially in the event the U.S. Department of Justice opposes L'Oreal's acquisition of Maybelline."

Both Benckiser and L'Oreal also are rumored to be on the list of suitors interested in Helene Curtis Industries, though topping that list was Unilever and Johnson & Johnson, followed by Colgate-Palmolive Co.

Curtis confirmed in a statement that it's "in contact with one or more parties who have expressed an interest in a possible business combination," but wouldn't identify the suitors.

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