P&G Upsets Wella Rebels With Licensing Deal

02 February 2004

Procter & Gamble has infuriated minority shareholders in Germany haircare brand Wella by licensing its products around the world.

P&G -- which last year won majority control of Wella -- plans to market and sell the German company's retail haircare brands under a five-year deal.

However, a group of disgruntled minority shareholders insists the US giant has no right to make such a move, as it has not yet integrated Wella fully into its operations.

These investors resisted P&G's attempts to buy full control of the company, arguing that the €65 ($81; €45) per share offered for non-voting preference stock was too low. They believe the price should be nearer the €92.25 bid for voting shares, and will call for an auditor to probe the takeover at an extraordinary general meeting this week.

At present, P&G controls 99.6% of the voting stock but only around 80% of the preference shares, equivalent to around 91% of total equity. The rebels argue this is not enough for P&G to integrate Wella, making the licensing deal illegal.

"We firmly believe this licensing agreement runs totally counter to German corporate law," declared the dissidents. "No independent management board would ever consider such a step. We have been warning for months that P&G would take this route -- but we will fight to protect our investment in the company."

To which P&G retorted: "This was looked at extensively from a legal standpoint, both on the P&G side and on the Wella side. There are arm's-length financial arrangements and this is a good deal for everybody."

The products involved in the licensing deal include Wellaflex and Shock Waves, which are sold in stores rather than in salons. Wella will be paid a licensing fee.

Data sourced from: Financial Times; additional content by WARC staff