Berlin — The showdown between minority shareholders and Wella’s management and majority shareholder, Procter & Gamble, escalated from a high-noon to a possible high-midnight scenario at an extraordinary shareholders meeting held in Frankfurt Tuesday.

As of 6 p.m. local time, the closed meeting, attended by some 300 to 400 shareholders, along with 16 members of Wella management who were fielding questions from the dais, showed no signs of winding down soon, according to a participant. “It could easily go into the night,” he said.

The extraordinary meeting was called by minority shareholders to address their concerns that Wella has not been run in their best interests since P&G ’s acquisition of almost 100 percent of voting shares and 80 percent of share capital last year.

According to German takeover law, P&G’s stake, which carried a $6.95 billion (5.6 billion euros at current exchange rates) price tag, is not sufficient to delist Wella and thereby fully integrate it into the American beauty giant. P&G would have needed to acquire 95 percent of all outstanding shares, but the 65-euro offer for nonvoting shares, compared with 92.25 euros for voting shares, met with angry resistance from minority shareholders.

Now minority shareholders say P&G is already treating Wella as a mere operating unit. Last week’s agreement, allowing P&G to license and sell Wella’s retail hair care brands worldwide, is just “the tip of the iceberg,” asserted Joseph Broich, a lawyer who represents a consortium of shareholders representing about 9 percent of the capital stock of Wella. This is an investment of some 700 million euros at current stock market quotations, he said at the meeting.

According to a transcript of his speech, which was obtained by WWD, Broich declared that the licensing agreement was clearly not in the best interests of Wella shareholders. “One need not be an expert in stock corporation law to grasp that no independent board of management could seriously hand over the marketing of a substantial business division to a competitor. Such a far-reaching act is only possible, if at all, within the framework of…a control agreement,” he said.

He added that it was an “absurd and abstruse” concept to believe that a “Wella product like Crisan would be marketed by its competitor, Procter & Gamble, who produces Head & Shoulders.”He also suggested that Wella’s hair care brands might receive the same treatment as the Vidal Sassoon hair care brand, currently the object of litigation between Mr. Vidal Sassoon and P&G. “[Sassoon] accuses Procter & Gamble of scaling back marketing activities for Vidal Sassoon and marketing efforts in favor of Procter & Gamble brands, something that led to a dramatic shortfall in license sales,” Broich told the meeting.

With its voting control, P&G neatly vetoed the three motions forwarded by the minority shareholders, a source attending the meeting said. These called for a vote of no confidence in Wella chief executive officer Heiner Gürtler, who is also now president of P&G’s Global Leadership Council; an independent audit to ascertain how far P&G has already “infiltrated” Wella with its own employees, and a look into whether Wella management is fulfilling its responsibilities and to what extent P&G has access to Wella’s trade secrets. Moreover, the minority shareholders insist that a control or domination is needed. Such an agreement would allow P&G to fully integrate Wella after “compensating” smaller shareholders.

However, a spokesman for another international group of shareholders, who represent about 10 percent of the outstanding free-floating capital shares, stressed that minority shareholders are not just out to secure a better price for their shares; they’re chiefly worried about their investment.

“The offered price was insulting, but we’re also now worried that [P&G] will thoroughly disregard us, a group which perhaps has no voting rights but still owns 20 percent of the equity of the company. We’re concerned that P&G will strip the company of its assets and we’ll be left here holding worthless shares,” he told WWD. “The licensing agreement is exactly the kind of thing we’ve been afraid of.”

He said his group intends to go to court “within the next few days.” P&G has always maintained that its offer to minority shareholders was fair and above and beyond what is required by German law.

And, according to Mathias Habersack, professor at the University of Mainz, P&G does not need a domination agreement in order to transfer central administrative, marketing or distribution functions from Wella to P&G, as long as the synergy effects are also beneficial to Wella.In the meantime, according to German press reports late Tuesday, Gürtler also told shareholders at the meeting that a further “cooperation” with P&G in fragrances, cosmetics and professional hair care was “conceivable.”

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