P&G Chief Financial Officer Clayton Daley told Advertising Age last week, "Obviously, I can't comment on any possible swap with Bristol-Myers," but he added, "You will of course not be surprised that when a brand like [Clairol] comes on the market we would be interested." He said he's awaiting issuance of a prospectus expected after this week.
Swapping brands would keep P&G from having to increase debt, dip into cash or use its devalued stock, trading at around $75-36% off its high reached in January. Clairol could command up to $5 billion, analysts estimate, more than double the $2.3 billion P&G paid in 1999 to acquire Iams pet food in the company's costliest acquisition ever.
"I don't think [P&G is] going to let this get by them if it's something they think is strategic," said Deutsche Bank Alex. Brown analyst Andrew Shore. He said Clairol is "maybe the last trophy property out there" in hair care that's available without buying an entire company.
P&G may have some competition for the sought-after brands, which includes Herbal Essences. German consumer products company Henkel indicated last week it may bid for Clairol, while analysts believe Unilever and L'Oreal may also be interested.
But P&G brings one thing the others lack-drug businesses, ranging from such over-the-counter brands as Pepto-Bismol and Vicks to such prescription drugs as Actonel, an osteoporosis drug approved for use in the U.S. earlier this year.
When Clairol was put up for sale in September, Bristol-Myers executives said they would consider a stock swap or "other transactions." Bristol-Myers is exiting hair care to focus on its core drug business. P&G also has antibiotic, cancer and HIV drugs in development that could prove attractive to Bristol-Myers, which has existing prescription drugs in each area.
P&G's drug brands could give it a decisive edge in bidding for Clairol, analysts said, in part because an asset swap could have tax advantages over a cash or stock deal.
P&G is the global leader in hair care, but its $3-billion-a-year drug business is a 98-pound weakling among such competitors as Novartis, with $22 billion, Pfizer, with $16 billion or Bristol-Myers, with $14 billion.
Besides a major boost to its shampoo, conditioner and styling business, Clairol would give P&G the only missing piece in its global beauty care business-hair coloring. Besides Clairol, Bristol-Myers hair care business also includes the smaller Infusium and Aussie brands, though interest centers on Clairol. FCB Worldwide, New York, currently handles Clairol's hair coloring brands.
A drugs-for-hair-care deal could benefit Saatchi & Saatchi, Grey Global Group, New York, or Leo Burnett Co., Chicago, which currently handle P&G hair care brands, though an antitrust settlement could also require some P&G shampoo brands to be divested.
D'Arcy Masius Benton & Bowles, which handles most of P&G's over-the-counter drugs, could be a loser, since it handles P&G's biggest OTC drug brand-the Vicks megabrand. D'Arcy also handles some Bristol-Myers drug brands, Grey Global Group has Actonel and Leo Burnett handles Pepto-Bismol and Metamucil. Kaplan Thaler Group, New York, which handles Clairol now, is, like D'Arcy and Leo Burnett, part of the BCom3 Group.