May 4, 2001

                    Media & Marketing

                    P&G, Japan's Kao Are Seen Bidding For Bristol-Myers's Clairol Unit

                    By NIKHIL DEOGUN, EMILY NELSON and YUMIKO ONO
                    Staff Reporters of THE WALL STREET JOURNAL

                    Procter & Gamble Co. and Japan's Kao Corp. are expected to
                    submit final bids to acquire Bristol Myers Squibb Co.'s Clairol
                    hair-care business, which should fetch $4 billion to $5 billion,
                    people familiar with the matter said.

                    The auction, which analysts had expected to be hotly
                    contested, has cooled considerably since Bristol, wanting to
                    focus more on its drug business, put the hair-care unit up for
                    sale in September. During recent months, a host of
                    consumer-products companies from Anglo-Dutch company
                    Unilever to Germany's Wella AG and Henkel AG have dropped
                    out of the bidding for one reason or another, from being
                    occupied with other deals, to a reluctance to pay up for the
                    business.

                    In a blow to Bristol, one of the strongest
                    potential bidders, consumer products
                    maker Beiersdorf AG of Germany,
                    decided in the past few days against
                    submitting a bid, people familiar with
                    the matter said. Beiersdorf, best known
                    for its Nivea products, thought the
                    business was too expensive. German financial-services
                    company Allianz AG owns 38% of Beiersdorf.

                    The bids are due Friday, though the auction could stretch out
                    longer and other bidders could emerge, these people say. A
                    spokesman for Bristol confirmed the New York company
                    expected to receive bids this week but declined additional
                    comment. P&G and Kao declined comment.

                    The conventional wisdom among analysts has been that P&G,
                    of Cincinnati, would have the deepest pockets and could
                    easily walk away with Clairol, known for its Herbal Essences
                    brand. Considered the comeback kid of the hair-care trade,
                    Herbal Essences was big during the 1970s, faded during the
                    1980s and was relaunched in 1993 with humorous ads and
                    shampoo in clear bottles with pictures of herbs. The line
                    includes hair-care, skin-care and bath items.

                    People familiar with the matter said P&G is unwilling to pay
                    too high a price for fear of angering investors who believe the
                    company should concentrate on fixing its business and
                    shouldn't be distracted by a big acquisition. P&G is in the
                    midst of a multiyear restructuring program and plans to cut
                    16% of its 110,000 employees.

                    "The timing is not good," says William Steele, an analyst at
                    Banc of America Securities in San Francisco. "Is Clairol critical
                    to the long-term success of Procter & Gamble? No. So you
                    don't need it." P&G shampoo and hair-care products include
                    Pantene, Pert, Head & Shoulders, Vidal Sassoon and
                    Physique.

                    Another potential consideration for P&G would be antitrust
                    rules, though some analysts said if regulators view the hair
                    care market as including the professional segment, such as
                    salons, P&G could get a deal to pass muster.

                    Hair-Color Know-How

                    For P&G, the real attraction of Clairol is its hair-color know
                    how. P&G can create new hair-care brands, as it did with
                    Physique, a line of pricier shampoos and styling products
                    such as gel and mousse. P&G's line is missing a hair-color
                    product -- an area in which Clairol is strong and the market is
                    growing fast.
 
 

                                         Down to the Wire

                    Bristol-Myers's Clairol unit is expected to get bids from two
                    major suitors.

                    CLAIROL

                         Parent: Bristol-Myers Squibb Co

                         Rank: No. 1 hair products company in the U.S.

                         Key brands: Nice N' Easy; Ultress; Herbal Essences,
                         Clairol Renewal 5x

                         2000 sales: $1.89 billion

                    PROCTER & GAMBLE

                         Base: U.S.

                         Key brands: Olay; Tide; Crest; Pantene; Head &
                         Shoulders

                    KAO

                         Base: Japan

                         Key brands: Jergens soap; Biore skincare; Ban
                         deodorants

                                              Sources: Bristol-Myers, WSJ research
 
 

                    If P&G isn't aggressive in bidding for Clairol, that could
                    create an opening for Kao. Kao has the financial wherewithal
                    to make a strong bid and borrow money at very low rates in
                    Japan to finance its offer.

                    While Kao long has been Japan's biggest consumer-products
                    company, it has been a bit player outside its home turf. Kao,
                    which had consolidated sales of 821.6 billion yen ($6.8
                    billion) in the year ended March 31, derived about a fifth of
                    that outside Japan. It tiptoed into the U.S. market in 1988
                    through the acquisition of Andrew Jergens Co., a sleepy
                    company known best for its skin cream. One of its first hits in
                    the U.S., Biore strips, came in the mid-1990s. They are
                    bandage like strips that cleanse the pores when plastered
                    over one's nose.

                    Kao's Market Is Maturing

                    Facing a maturing market in Japan, Kao has stated recently
                    that it wants to be more aggressive overseas, especially in
                    the U.S. and China, and that it is considering mergers and
                    acquisitions to speed up growth. It states on its Web site
                    that its goal "in the near future" is to become one of the
                    world's top 10 consumer-products companies, by racking up
                    more than $10 billion in consolidated sales, of which 30%
                    would come from outside Japan.

                    Kao has done small deals with various companies outside
                    Japan. Earlier this year, it formed a 50-50 joint venture with
                    Decatur, Ill., agribusiness company Archer Daniels Midland
                    Co. to jointly market its diacylglycerol oil, which Kao touts as
                    more healthful than regular cooking oil. Last year it acquired
                    the Ban brand of deodorants from Chattem Inc. in
                    Chattanooga, Tenn. In Japan, it formed a joint venture with
                    Swiss pharmaceutical giant Novartis AG to create and market
                    over-the-counter products in Japan.

                    In Japan, Kao is best known for such brands as Attack
                    laundry soap, Biore skincare products and Sofina cosmetics.

                    -- Sarah Ellison contributed to this article.

                    Write to Nikhil Deogun at nik.deogun@wsj.com, Emily Nelson
                    at emily.nelson@wsj.com and Yumiko Ono at
                    yumiko.ono@wsj.com