With a proposed $6.9 billion megadeal for Wella, Procter & Gamble is poised to pass longtime rival L’Oréal, to become the biggest player in the hair care category, an achievement that no doubt cuts deeply into the French beauty company’s pride.
Cincinnati-based P&G Tuesday announced it had inked a deal to take control of German firm Wella AG for a deal including $3.4 billion in cash. The purchase, which had been expected for the last month, involves P&G buying out the stake held by Wella’s majority shareholders, the Ströher family. That stake gives P&G 77.6 percent of the voting shares. German law requires ownership of 75 percent of the voting shares to gain control. In addition, P&G said it will make a tender offer for the remaining outstanding shares, putting the value of the entire deal at $6.9 billion.
P&G will fund the deal through $5.7 billion in cash and the assumption of $1.2 billion in debt. The tender for the remaining voting shares represents a 58 percent premium over the average stock price during the last six months, while the tender for preferred shares represents a 15 percent premium.
The deal is subject to regulatory review and government approval in various markets, including the European Union and the U.S.
Wella’s board said in a statement that it has been advised of the agreement signed by Wella family members. The board, which emphasized that it was not a party to the agreement, added: "The announced signing of a contract does not mean that Procter & Gamble has already gained control of Wella AG. Rather, the shares will only be transferred to Procter & Gamble once the necessary regulatory approvals have been obtained. Until that point in time, there will be no major changes in the running of Wella’s day-to-day business."
Heiner Gürtler, Wella’s chairman, said in the statement: "We will continue to implement our strategy and pursue our internal targets."
P&G’s announcement was made during a company presentation at an analyst-investor meeting hosted by Merrill Lynch Tuesday morning. Shares of P&G closed Tuesday at $86.62, up 1.3 percent, in trading on the New York Stock Exchange.