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Hair Care’s New No. 1: P&G Leaps to Top Rank With Plan to Buy Wella

Procter & Gamble’s $6 billion acquisition of Wella brought P&G bragging rights as the world’s largest hair care company, finally passing rival...

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In addition to synergies and global sourcing capabilities in hair care, Wella’s fragrance business also is complementary to P&G’s. Wella’s fragrances, such as Gucci and Escada, targets the female customer, while P&G’s Lacoste and Hugo Boss targets the male consumer.

A credit analyst observed: "It doesn’t look like there’s a lot of overlap in these businesses. The deal gives P&G new markets, new product lines and new capabilities as far as research and development are concerned."

Amy Low Chasen, equity analyst at Goldman, Sachs & Co., wrote in a research note: "The Wella deal is a nice add-on to P&G’s global hair care business but was not critical. Nonetheless, the expected synergies give us comfort that Wella will not be a deterrent to the company’s existing growth strategy — to the contrary, it could be additive. Post-Wella, hair care will represent about 16 percent of P&G’s sales up from about 11 percent currently."

Douglas Christopher, an analyst with Crowell Weedon, said the acquisition signals the importance of being a player in the salon market.

"It’s a big acquisition at a time I don’t think they need to be making one, but maybe they do. They see the higher market, salons, as an important business to be in," Christopher said. "They are buying some good brands, [and the price for Wella] was less than two times sales, but in a tough global economy, and especially Germany, which can’t get out of their own box, [P&G] should have paid a more reasonable price."

Despite edging out L’Oréal in overall hair care sales, there are still questions over whether P&G can successfully gain share from L’Oréal, a leader in many of the same markets where P&G and Wella products can be found. That, in part, was one reason why the maneuvering for control over Wella was closely watched by industry executives both overseas and here.

In addition to P&G, L’Oréal and Unilever were reportedly interested in Wella. Earlier this month, as rumors swirled that P&G would swoop in to take over the hair and cosmetics firm, consumer goods firm Henkel fired the first shot by acquiring a 6.9 percent stake in Wella.
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