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Berlin — Sweetening the pot by about $87 million in the face of mounting shareholder dissatisfaction, Procter & Gamble has raised its offer for Wella AG preferred shares by $3.85 to $71.50.
In a statement, P&G said: “Following discussions with the Wella executive board, and in anticipation of its support, P&G has increased the offer for the [preferred] shares.”
Procter & Gamble’s official tender bid became public Monday as it prepared to release improved results for its third quarter.
“The executive board welcomes Procter & Gamble’s decision to increase the offer price for the [preferred] shares,” Wella said in a statement issued in Germany.?It also noted that the company would publish a response to the offer in about two weeks, and would not comment further on the offer document until that time.
In March, P&G signed an agreement to purchase 77.6 percent of the voting stock in Wella from its founding family majority shareholders at a cash price of $109.18 per share. This represented a premium of about 22 percent.
At that time, P&G said it would make a tender offer of $67.65 for the preferred shares, a markup of only 0.25 percent. Dollar figures are calculated from the euro at current exchange.
German competitor Henkel, which had quietly acquired a 6.86 percent stake in Wella — including 10.38 percent of the preferred shares — was openly disgruntled with the deal. At the company’s annual shareholders’ meeting April 14, chief executive officer Ulrich Lehner dismissed P&G’s offer as “unacceptable.” Other shareholders reportedly lodged a complaint with the German Financial Supervisory Agency, BaFin, last week.
In a P&G statement, chief financial officer Clayton Daley said: “We are pleased with the Wella executive board’s reaction to our improved offer price. This price is final and will not change during the tender period. P&G has no intention of increasing the share price irrespective of the number of shares tendered.”
P&G already has voting control of Wella, but needs 95 percent ownership to squeeze out minority investors and delist the company. The tender offer will run until May 28. As required by German law, an extended two-week offer period is expected to start June 6. Both European and American regulatory agencies must approve the deal.
The total shares of Wella are valued at about $6 billion.
Sven Dobke, analyst with M.M. Warburg in Hamburg, said it is likely that shareholders will accept the new P&G offer. “It’s not optimal, but it’s still better than it was, and P&G has sent out a strong signal that it will not be coming back with another offer.” He said Warburg is recommending its clients accept the bid, or sell their shares now on the market. Wella preferred shares were trading at $72.60 on Monday, and over the last five days, have sold roughly on par with the P&G offer price of $71.50.
Separately in Cincinnati on Monday, P&G said higher volume and favorable foreign exchange rates let it generate robust top- and bottom-line growth in the third quarter.
For the three months ended March 31, the Cincinnati-based consumer products giant reported net income swelled 22.5 percent to $1.27 billion, or 91 cents a diluted share. By comparison, last year the firm recorded earnings of $1.04 billion, or 74 cents. Excluding restructuring charges in year-over-year periods, net income increased 12.9 percent to $1.34 billion, or 96 cents, versus $1.19 billion, or 84 cents last year. Reported earnings per share beat the Wall Street estimate by a nickel, and, inclusive of the restructuring charges, matched it. Sales for the period grew 7.6 percent to $10.66 billion from $9.9 billion a year ago.
“P&G’s core businesses and leading brands are strong,” said chief executive officer A.G. Lafley in a statement. “We are broadening product offerings in core categories. We are offering better consumer value and leading innovation in developing and developed markets, and are on track to deliver P&G’s fiscal year sales and earnings goals in a very challenging global economic environment.”
P&G said unit volume for the quarter rose 7 percent over prior-year levels, driven by double-digit growth in the health care business. Net sales benefited 3 percent from the strength of the euro and other currencies against the U.S. dollar.
By business segment, health care and beauty care were the sales gain leaders. Health care led all segments with an 18 percent increase in sales to $1.43 billion and produced a 19 percent jump in net earnings to $147 million from a year ago. Unit volume increased 18 percent. Beauty care, P&G’s second-largest business after fabric and home care, saw sales rise 10 percent to $3.03 billion and net earnings also grow 19 percent to $463 million. Unit volume was up 9 percent on the strength of Pantene, Head and Shoulders and feminine care. Collectively, health care and beauty care account for 41.5 of P&G’s net sales and 44.9 percent of the company’s net income.
For the first nine months of the year, P&G said net income shot up 22.9 percent to $4.23 billion, or $3.01 a diluted share, versus last year’s earnings of $3.44 billion, or $2.45. Excluding restructuring charges in both periods, profits increased 13.5 percent to $4.51 billion, or $3.21, versus $3.97 billion, or $2.83. Sales for the period rose 7.9 percent to $32.46 billion from $30.07 billion a year ago.
Meanwhile, the German financial press was also filled with reports of a possible cooperation between Beiersdorf and Henkel. At a presentation to Reuters?on Friday, Beiersdorf ceo Rolf Kunisch was quoted as saying that cooperation with Henkel was “conceivable.” While he qualified this statement by saying the companies were not currently holding talks,?he said there were areas, like hair color or adhesive tapes, where Henkel and Beiersdorf would supplement each other.
He said there were three possible scenarios for the future development of Beiersdorf: to remain independent, cooperate with Henkel or be taken over by P&G, Unilever or L’Oréal. Kunisch said Beiersdorf was capable of doubling its turnover in the next 10 years based on its current momentum, which would amount to a yearly growth rate of 7 to 8 percent. “In the last 10 years, we’ve proven that we’re capable of achieving that on our own,” he said.