BERLIN — Procter & Gamble failed to significantly increase its stake in Wella at the close Wednesday of its improved tender offer for Wella preferred shares.
Shareholder dissatisfaction with the upgraded $76.70 price offered for Wella preferred shares (from the original offer of $72.57) and two hedge fund suits challenging the bid put a dent in P&G’s efforts to buy up outstanding Wella shares. All dollar figures are calculated from the euro at current exchange rates.
As of the close of the market Tuesday, P&G’s offer had been accepted by holders of an additional 1.2 percent, or nearly 800,000 of Wella’s preferred shares as well as 3.9 percent, or 2.6 million, of the outstanding ordinary shares, which hold 5.9 percent of the voting rights. Together, that accounts for 5 percent of total outstanding shares. A final accounting of shares acquired is expected to be released today.
With its agreement in March to buy 77.6 percent of ordinary shares from the family of the Wella founder, P&G already has voting control of Wella, but only 50.7 percent of total share capital. With the close of this first tender period, that figure is now closer to 55 percent, an industry source said.
A second and final two-week tender period is expected to begin June 6. P&G has said that it will not raise its offer for preferred shares, and under German law, this would no longer have been possible after the official close Wednesday of the first tender period.
Two lawsuits challenging BaFin, the German financial regulatory authority’s approval of the preferred share bid, were rejected Wednesday by Frankfurt’s higher regional court. The suits were brought by Mellon HVB Alternative Strategies, a New York hedge fund, and Elliot Associates, also a U.S. hedge fund. They argued that the 65 euro price for preferred shares, compared with the 92.25 euros for ordinary (voting) shares, discriminates against preferred shareholders. The German takeover act, they said, requires equal treatment for nonvoting equity shares, including preferred shares, and normal shares with voting rights.
The offers, however, were in full compliance with the legal minimum price requirements set by German law, both BaFin and Wella noted.It now looks highly unlikely that P&G will manage to round up the 95 percent of Wella shares required by German law to squeeze out minority shareholders and delist the company. Nor is it much more probable that it will reach the 80 percent of the total value of share capital which some observers said would allow P&G to benefit from tax breaks in the U.S.
However, a P&G spokeswoman previously stated that even if minority shareholders don’t tender their shares, the company will be able to achieve its synergy goals. While the company “would prefer to have 100 percent of the Wella [holders], it is not essential, and we are prepared to operate with minority shareholders if existing shareholders don’t tender at the tender offer price,” she said.
“P&G already has many companies in its stable that aren’t delisted,” a source close to the company said. The company doesn’t need more shares, he continued, noting that the tender offer was a mandatory one in compliance with German law.
Henkel looks to be one of those minority shareholders P&G will have to deal with. The German company holds 6.86 percent of Wella share capital, and while Henkel wouldn’t comment, the figures imply that Henkel did not tender its shares.
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