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P&G Faces Wella Stock Pressure

BERLIN — Procter & Gamble is coming under increased pressure to raise its bid for Wella. Dissatisfaction among preference shareholders is reportedly mounting and sources say an unidentified group lodged a complaint on Thursday with BaFin, a...

BERLIN — Procter & Gamble is coming under increased pressure to raise its bid for Wella. Dissatisfaction among preference shareholders is reportedly mounting and sources say an unidentified group lodged a complaint on Thursday with BaFin, a German Financial Supervisory Agency. BaFin officials were not available for comment.

As reported, Procter & Gamble inked a deal to take control of Wella last month, offering the founding family $99.44 a share for their 77.6 percent of the voting shares. All dollar figures are calculated from the euro at current exchange rates.

The remaining 22.4 percent of the ordinary shares, which have voting rights, are in free float. Henkel, for one, is known to own 4.99 percent of the voting shares, and 10.3 percent of the preferred shares.

The preferred shares are 100 percent in free float and have no voting rights. They represent about a third of total share capital and are mostly in the hands of institutions. Procter & Gamble’s initial, unofficial offer for these shares was placed at $66.30 a share, a markup of just 0.25 percent over the closing price prior to the deal’s announcement. In contrast, P&G offered the family shareholders a 22 percent premium for their voting shares.

Investors now say that this offer is unfair to minority shareholders, and while possibly legal, it is not in the “spirit” of the German law, which calls for the equal treatment of all shareholders.

P&G’s formal offer has now reportedly been received by BaFin. Again, BaFin officials were not available for comment. A spokesperson at Wella, however, said the company expected BaFin to make the offer public next week after the Easter holidays. (Friday and Monday are public holidays in Germany.)

While P&G already has voting control of Wella, a rejection of its tender offer will leave it far short of the 95 percent ownership required to squeeze out minority investors and delist the company. In the worst-case scenario, P&G would not be able to take full control of Wella nor completely integrate it into P&G, and might have to function as the controlling majority shareholder in a publicly listed company.

When P&G announced the Wella deal in March, the price was placed at $6.9 billion. At the unofficial common/preferred share prices set, about $3.4 billion was earmarked for the family shareholders, another $1.2 billion assumed debt and the remaining $2.3 billion to cover acquisition of the outstanding shares.

Although industry sources have not put a new price tag on the deal, some say investors want P&G to match the offer for ordinary and preference shares.

German financial papers said in early April that at least one major Wella investor had already nixed the offer. Earlier this week, Henkel chief executive Ulrich Lehner also dismissed P&G’s tender bid as “unacceptable.” He suggested that a complicated takeover would be considerably eased if P&G were to reduce the price difference between the offers for ordinary and preference shares. According to reports, however, Henkel is not part of the shareholder group that lodged the complaint with BaFin.