BERLIN — Score one for the Wella AG minority shareholders.
On Monday, Wella and Procter & Gamble inked a “domination and profit transfer” agreement, which not only meets a long-standing demand for such an agreement by the minority shareholders, but also raises the price — by 12.1 percent — that P&G is willing to pay for the outstanding, nonvoting shares of Wella.
The agreement calls for raising the price per share of the outstanding, nonvoting shares of Wella to 72.86 euros, or $86.41, from 65 euros, or $77.09, which was the improved tender offer in May 2003. All dollar figures are calculated from the euro at current exchange rates.
Minority shareholders, whose holdings represent almost 20 percent of total share capital, have argued that P&G was unlawfully competing with Wella in the absence of a domination agreement, which is set by German law. They recently tried to introduce a resolution on behalf of Wella claiming damages from P&G at the upcoming annual general meeting. Until Monday’s announcement, P&G maintained that a domination agreement was not required. Wella said P&G’s decision responded to a request from Wella’s management board.
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Under the agreement, P&G will be entitled to give instructions to the Wella management board, and profits of Wella AG will be transferred to P&G. But P&G still faces minority shareholder hurdles in terms of the offered price and other compensation issues before it can effectively take control of the company. Although P&G owns almost 100 percent of Wella voting shares, it only holds 80 percent of total share capital, not enough under German law to delist the company and fully integrate it into the American group.
Speaking on behalf of minority shareholders, Stephen Aulsebrook of Close Brothers said, “Of course we are delighted to see P&G finally acknowledge the need for a domination agreement.” But he quickly added that the offer price was not high enough. Aulsebrook said the value on the outstanding shares “falls a long way short of management’s own projections just a few months ago.”
He said minority shareholders also will seek compensation both for P&G’s “unlawful interference” and “unlawful competition” with Wella. “So there’s much to be done,” Aulsebrook added.
The domination and profit transfer agreement was approved by Wella AG’s supervisory board, but is also subject to approval by Wella AG’s annual general meeting. The AGM was scheduled for May 13 but has been pushed back to June 8 to accommodate the legally required notice period resulting from Monday’s announcement and to avoid the necessity for two successive AGMs.
As an alternative to the cash offer, which applies to outstanding ordinary and preference shares, minority shareholders can opt for a fixed annual compensation payment of 3.81 euros, or $4.52, per ordinary share and 3.83 euros, or $4.54, per preference share from P&G based on the prospective profits derived from the enterprise value. — Melissa Drier
Aventis Boards OK Offer
PARIS — Sanofi-Synthelabo’s intended hostile takeover of pharmaceuticals rival Aventis took a friendlier turn this weekend.
On Sunday, Aventis’ management and supervisory boards approved a Sanofi offer worth $65.6 billion at current exchange rates, or 55.3 billion euros. Sanofi’s original bid had valued Aventis at $57.5 billion, or 48.5 billion euros.
The move, which will result in the formation of a firm called Sanofi-Aventis, is supported by Sanofi’s principal shareholders, L’Oréal and Total.
“L’Oréal rejoices at the friendly nature of the offer, the spirit of which will facilitate the coming together of the two groups and the success of the new entity, Sanofi-Aventis,” L’Oréal said in a statement. The French beauty giant, which currently holds a 19.6 percent stake in Sanofi, also said it plans to hold onto its shares.
Sanofi-Aventis, will become the third largest pharmaceutical group in the world and the biggest in Europe. Sanofi chief Jean-François Dehecq will be its chairman and chief executive officer. — Brid Costello