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