Media & Marketing
Analysts Predict Bristol-Myers May See Low Bids for Its Clairol Hair-Care Unit
A WSJ.COM News Roundup
NEW YORK -- With final bids for Bristol-Myers Squibb Co.'s
Clairol hair-care business due Friday, some on Wall Street
doubt the drug maker will receive anywhere near the high end
of the projected price tag of between $4 billion and $5
billion.
Procter & Gamble Co. and Japan's Kao
Corp. submitted bids in an auction for
the unit, which was put up for sale last
September, people familiar with the
matter said.
The $4 billion to $5 billion purchase price
makes sense because consumer-products
companies tend to sell at two to three
times their sales, analysts said. Clairol
generated sales of $1.89 billion in 2000.
When Wall Street analysts were batting around the $5 billion
figure about earlier this year, few thought the price tag was
excessive. Rather, it was considered appropriate for a
well-known, established name in hair care.
But given the limited number of bidders said to be interested
in acquiring Clairol and the number of bidders that have
dropped out since the auction began, Bristol-Myers could
wind up with some low-ball bids, said analyst Neil Sweig of
Ryan Beck.
"My guess is if one company offers $4.5 billion or above,
Bristol-Myers will jump," Mr. Sweig said. "But anything that
starts to flirt with $4 billion and below runs the risk of
problematic delays."
Germany's Beiersdorf AG elected against making a bid,
according to people familiar with the matter, because it
thought the price tag was too high. 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 pony
up for the business.
The conventional wisdom among analysts has been that
Cincinnati-based P&G would have the deepest pockets and
could easily walk away with Clairol.
But people familiar with the matter said P&G is wary of
paying too much for fear of angering investors who believe
the company should concentrate on fixing its business rather
than making a big acquisition. P&G is in the midst of a
multiyear restructuring program and plans to cut 16% of its
110,000 employees.
If the bids fail to meet the undisclosed reserve price,
Bristol-Myers could be pushed to lower the reserve.
Another possibility, though remote, would be to spin off the
business to shareholders, as the company did when its plan
last fall to sell its Zimmer medical-device business failed to
garner an acceptable price.
Most analysts, including Mr. Sweig, don't think Bristol-Myers
will spin off Clairol, however, and will instead negotiate an
acceptable sale rice.
"It was never in the plan to spin off" Clairol," said CIBC
World Markets analyst Mara Goldstein.
Bristol-Myers spokesman Charles Borgognoni wouldn't
comment on the auction, saying, "we view the specifics with
regard to any negotiation about the divestiture of Clairol as
proprietary and we won't discuss it."
A Procter & Gamble spokesman declined to comment. A Kao
spokesman couldn't be reached for comment.