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Johnson & Johnson's $924.1 million acquisition of Neutrogena Corp. is likely to reshape the beauty industry-and ultimately J&J itself.

In the wake of J&J's pre-emptive bid, said to have topped an earlier $650 million overture from Unilever, offers for small, midsize and family-run companies are expected to accelerate. Helene Curtis Industries and St. Ives Corp. are considered odds-on targets.

"Family-controlled companies are going to take a look at the sale price and say that's not bad," said PaineWebber analyst Andrew Shore, New York. "Others like Helene Curtis will have to wonder."

Coming on the heels of Bristol-Myers Squibb Co.'s acquisition of Matrix Essentials this summer, J&J's Neutrogena deal underscores healthcare companies' revived interest in the beauty business.

"This is a flip-flop from the last decade or so. The rekindled interest follows the changed relationship between the government and drug companies as Food & Drug Administration approval of new drugs has slowed," said industry consultant Allan Mottus.

In the mid-1980s, Eli Lilly & Co. sold Elizabeth Arden Inc. while Squibb Corp. jettisoned Charles of the Ritz and Schering-Plough Corp. shed Maybelline.

By 1992, cosmetics companies were also fretting their previous owners would soon poach on their turf with miracle prescription skincare drugs.

The threat has yet to become reality, with J&J's Ortho unit still awaiting approval to market Renova, an anti-aging prescription treatment that will be handled by DDB Needham Worldwide.

But approval is expected and once it comes, there is widespread speculation J&J will seek Renova's over-the-counter approval.

Enter Neutrogena. Neutrogena's "good for you" image fits like a second skin with J&J's clinical efficacy image.

"J&J paid a very big price ... as they want to take Renova over-the-counter and Neutrogena is a great vehicle for that," said Maybelline President-CEO Bob Hiatt. "At the minimum, they can use the company's credibility with the trade and dermatologists to get what they are after off to a good start."

J&J won't discuss its plans. Obviously, Neutrogena's $282 million in sales of skin and haircare products will boost J&J's presence in categories where it has been a minor player, with such skincare brands as Purpose, Clean & Clear and Roc.

And J&J is expected to expand Neutrogena overseas; in Europe L'Oreal sells a competitive me-too product called Neutralia.

While Neutrogena will be kept autonomous for now, one consultant expects the acquisition will prompt J&J to reorganize its consumer products business in a more rational manner.

"On the West Coast they already have begun testing a more logical sales structure," said this consultant. " ... For example, they have Monistat under the Advanced Care unit and K-Y jelly under consumer products. The mix was out of sync even before Neutrogena."

One thing not expected to change for now is Neutrogena's agency lineup, recently reshuffled with Carlson & Partners, New York, and Weiden & Kennedy, Portland, Ore., winning the $25 million account. J&J's agencies DDB Needham and Ammirati & Puris/Lintas, New York, are expected to benefit if there is any fallout.

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