P&G still seeking Clairol in spite of recent layoffs

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Even as it undertakes massive job cuts, Procter & Gamble Co. appears to have revived a proposal to swap at least part of its drug business to Bristol-Myers Squibb Co. in return for portions of the Clairol haircare business, according to executives familiar with the plans.

Meanwhile, P&G is considering what could be a more dramatic move: spinning off much of its sales force into a separate unit that also would represent other manufacturers' brands and in which P&G would retain at least partial ownership, according to other executives close to the company.

A P&G spokesman declined comment on either topic.

P&G broached the drugs-for-Clairol swap last fall when Bristol-Myers put the haircare brand on the market, but later took the idea off the table (AA, Nov. 27, 2000).

Final bids for the Clairol business are expected within days or weeks, according to analysts, with candidates believed to include P&G, Kao Corp., Henkel, Wella and Beiersdorf. An executive close to P&G said the company has prepared a bid that includes swapping at least part of P&G's drug business.

Fueling speculation about a Clairol deal were comments made March 22 by P&G President-CEO A.G. Lafley and Chief Financial Officer Clayton Daley as they fielded an analyst's questions following the announcement of 9,600 new job reductions at the company.

In his analyst briefing, Mr. Lafley brought up the possibility of divesting more major businesses and brands, similar to last month's announced spinoff of its snack and soft drink business into a new partnership with Coca-Cola Co. He also said brand swaps are among the options P&G is considering, although he did not name any.

Separately, as the P&G executives were questioned by Deutsche Bank Alex. Brown Analyst Andrew Shore about a possible Clairol deal and other merger-and- acquisition activity, Mr. Lafley wouldn't rule out deals despite the turmoil surrounding the company amid a massive restructuring.

"If there's an acquisition that is strategic, where we can get a quality brand or two that fits hand in glove with what we do well, we have to go for it," he said.

"We don't choose when another company puts a brand up for sale," Mr. Daley said. "When it does, we have to deal with it. And we're fully cognizant of the fact that it would add more to a situation that is already clearly difficult. And that, of course, we factor into our [pricing on a bid]."

Executives in P&G's market development organization also are anticipating a major outsourcing of their function, which executives close to the company said could involve spinning off much of the sales force as a separate brokerage open to other manufacturers' brands.

The move has been under consideration for more than a year, said one former sales executive, who said the idea actually was championed by sales executives who felt they had been unfairly blamed for P&G's sluggish sales. P&G now projects sales will be flat for the current fiscal year.

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