P&G would pay a combined $7 billion in cash and debt assumption, making the deal P&G's biggest ever, ahead of its $5 billion acquisition of Clairol from Bristol-Myers Squibb Co. in November 2001. P&G's offer represents a 22% premium to Wella's $81 per share Monday closing price, which has already been boosted by weeks of takeover speculation.
While the Stoeher family controls Wella, P&G's offer has not yet been embraced by Wella's management. In a statement, Wella's executive board said it would offer an opinion on the possible consequences for the company and its employees and publish findings pursuant to German securities regulations.
Can succeed independently
"From a business perspective
The Wella deal marks the latest of several efforts by P&G since 1985 to transform itself into more of a beauty and personal care company. Wella represents a potential boon for P&G's global agencies, including Grey Global Group and Publicis Groupe's Saatchi & Saatchi, Leo Burnett Co. and Kaplan Thaler Group, each of which have existing key accounts in P&G's beauty care businesses.
$3.7 billion in sales
With sales of $3.7 billion, Wella is more than twice as large as Clairol, which had sales of $1.6 billion when P&G bought it. But unlike Clairol, Wella gets 47% of its business from the professional salon channel, where P&G has little presence currently; retail hair care makes up 29% of sales and the remaining 24% is from fragrance. Wella's fine fragrance brands, including Gucci and Escada, would make P&G much more of a player in a $20 billion global business hit hard by recession in recent years.
About 60% of Wella sales are in Europe, giving P&G beauty-care scale in markets where it has been a substantial underdog to L'Oreal. Wella also has a relatively strong business in Japan, with a relatively light North American presence, though P&G executives have been anticipating a stepped-up Wella hair care effort in North America for several years.
With double-digit sales growth over the past three years, Wella also is growing more than twice as fast as the 5% rate for global beauty care and well ahead of P&G's performance in recent years.
P&G consumer products rival Henkel, which announced last week it had bought a 6.86% stake, could create at least temporary obstacles to transfer of control of the company. At worst, Henkel comes away from the deal with at least a $100 million gain on its investment.
In its statement, P&G said it expects to leave Wella's professional hair care business "largely intact" but expects to generate annual cost savings of more than $300 million by 2006, apparently from elsewhere in the company.
Other takeover talks
Though P&G's interest had been rumored for weeks, the offer came as a surprise to some U.S. analysts, who believed P&G's apparent interest might be a ploy to soften up shareholders of Beiersdorf, another German personal care marketer. P&G's takeover talks with Beiersdorf apparently bogged down last year.