Assessing Proctor & Gamble in respect to the Wella merger

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The deal consisted of a combined share purchase and a voluntary public tender offer. Proctor and Gamble Co (P&G) concluded a share purchase agreement with Wella AG's (Wella) family shareholders, a highly complex deal involving 22 different selling parties which were advised by four law firms and two investment banks. Under the share purchase agreement, P&G secured 77.6% of the voting shares in Wella, a majority that allowed P&G to take control of Wella. Through a wholly-owned German subsidiary, P&G then successfully made a public tender offer to the remaining Wella shareholdersThe deal was a friendly takeover. P&G's main interest was to gain control of Wella. The public tender offer was addressed to all shareholders in the target. An all-cash consideration was agreed in the share purchase agreement and offered in the public tender offer.. There were no break fees involved in the deal except for an agreed fixed compensation payable to the Wella family shareholders in the event that the necessary antitrust clearance could not be obtained within a certain time frame.
As required under the German Securities Acquisition and Takeover Act (20 December 2001) (Takeover Act), P&G arranged for a bank confirmation stating that the bidder had taken the necessary measures to ensure that full finance for the tender offer would be available at the time that the consideration became payable. The first key document was the share purchase agreement between P&G and the Wella family shareholders, which was a private-to-private transaction. The second key document of the deal was the offer document, setting out the terms and conditions of the public tender offer. The content of both documents was governed by German law. The tender offer was governed by the Takeover Act. Pursuant to that Act, the German Financial Services Supervisory Authority (BaFin) reviewed and approved the offer documentThe deal was subject to antitrust clearance in the EU, US, Canada, Japan and Mexico. No shareholder approvals were required. On completion of the tender offer, P&G had acquired about 80% of the total shares and 98% of the voting rights in Wella.
Shareholders tried to block the tender offer from going ahead by filing a complaint (and a motion for injunctive relief) against the BaFin, arguing that the BaFin's approval of the P&G offer document violated their rights under the Takeover Act. In a landmark decision, the Frankfurt Higher Regional Court rejected the action (OLG Frankfurt ZIP 2003, 1392 et sql. dated 4 July 2003). The court held that an individual shareholder has no standing in the BaFin's approval process of the offer document. A group of certain hedge funds still holds more than 9% of the Wella shares. A squeeze-out cannot be effected yet because it requires a holding of at least 95% of the total shares outstanding.
AN ASSESSMENT OF P&G WITH RESPECT TO THE ABOVE DEAL
Procter & Gamble's bumpy path in buying German haircare product maker Wella could be a symptom of wider unrest among Germany's preference shareholders, say shareholders of Wella. The company that sells Ariel soap powder and Pampers nappies cannot sell its EUR 65 a share takeover offer to Wella's preference shareholders, who claim that the deal exposes a serious problem with ...