BERLIN — Wella’s minority shareholders are back in action, demanding that a resolution pressing for damages against Procter & Gamble be introduced at the Wella annual general meeting, to be held May 13.
The resolution would call for the annual general meeting to appoint a special representative who would be charged with enforcing a claim for damages against P&G on behalf of Wella. It is expected that an independent Frankfurt-based lawyer would take on this role.
The minority shareholders argue that P&G, which acquired almost 100 percent of voting shares and 80 percent of share capital last year, has not adhered to German law that requires P&G desist from competing commercially with Wella in the absence of a Domination Agreement. P&G would not be able to vote on the resolution at the annual meeting.
Stephen Aulsebrook, co-chairman of Close Brothers Corporate Finance Ltd., which made the demand on behalf of the minority shareholders, said the basic premise of this action “is to protect the rights of minority shareholders. P&G is behaving as if it owns 100 percent of [Wella], which it doesn’t. There are 1 billion euros worth of shares still out there.”
Minority shareholders have been advised, he continued, that, “in the absence of a Domination Agreement, P&G is legally precluded from competing against Wella. Of course, the reality is that P&G has been competing since day one. Obliging Wella to seek damages for this breach is one way for the minority shareholders to protect the value of their 20 percent stake in the company — unless and until P&G accepts the necessity of a Domination Agreement.”
P&G has long maintained that such a Domination Agreement is not required.
On Feb. 17, minority shareholders requested the courts appoint special auditors to examine the circumstances of P&G’s acquisition of a controlling stake in Wella. On March 4, they also filed an application with the courts to declare the licensing agreement between Wella and P&G unlawful. Both actions are pending and are not connected with the resolution demand.
Although Aulsebrook noted that German law gives shareholders holding more than 500,000 shares of a company the right to demand the inclusion of an additional resolution at the meeting, he said he expects Wella “to try every possible means to have the resolution not included.” But one way or the other, he concluded, “it’s going to be quite an interesting meeting May 13th.”
— Melissa Drier