Richardson-Vicks has wooed and won a "white knight" offer worth $1.2 billion from Procter & Gamble, thwarting an unsolicited takeover bid from Unilever.
Under terms of a definitive agreement announced jointly by the companies Tuesday, Procter & Gamble soon will begin a $69-a-share cash tender offer for about 17.7 million shares of Richardson-Vicks.
The deal between the two companies--Procter & Gamble makes soap and food items, while Richardson-Vicks markets beauty and health-care products--is the latest mega-merger among consumer product concerns. Last week, Philip Morris agreed to acquire General Foods in a $5.6-billion acquisition that will create the new leader among such companies.
Humphrey Sullivan, a spokesman for Unilever, the Anglo-Dutch concern that began its quest of Richardson-Vicks last month, said the company was "reading the news with interest" and had no comment. Richardson-Vicks had bitterly spurned Unilever, whose most recent offer was for $60 a share in cash, providing that Richardson-Vicks consented.
Wall Street generally applauded the combination. "It's a very close fit," said Robert W. Back, an analyst with Rodman & Redshaw in Chicago. The price of Richardson-Vicks rose $4.50 a share to $68 Tuesday on the New York Stock Exchange, with more than 1.4 million shares traded. Procter & Gamble's stock fell 62.5 cents a share to $55.75.
According to the companies' statement, Richardson-Vicks will maintain its headquarters in Wilton, Conn., while operating as a wholly owned subsidiary of Cincinnati-based Procter & Gamble.
The agreement is designed to ensure that an alternate bidder would find it extremely difficult to acquire Richardson-Vicks at a reasonable price.
First, Procter & Gamble is guaranteed the right to buy 6.3 million shares owned by the Richardson family and family trusts. Family members have borrowed heavily in their effort to boost their stake in the company and fend off Unilever, the world's largest producer of consumer products. The family's stake is about 36%, up from 7.3% before Unilever made its offer Sept. 9.
Second, should another company successfully launch a higher bid, the deal also gives Procter & Gamble the option of purchasing an additional 4.4 million Richardson-Vicks shares that have been authorized but not yet issued.
Together, these provisions would give Procter & Gamble 10.7 million shares, or 48.9% of Richardson-Vicks' outstanding shares. In addition, Procter & Gamble was given the right to purchase Richardson-Vicks' highly profitable Oil of Olay skin-cream business, an option that could take effect if Procter & Gamble's bid for the entire company is not successful. Analyst Back reasoned that elimination of that operation would make Richardson-Vicks far less attractive to another bidder.
In the joint statement, John S. Smale, president and chief executive of Procter & Gamble, said the merger was "an important step for Procter & Gamble. We are merging two fine companies with similar cultures and commitments to our customers."
Richardson-Vicks' chairman, Stuart Smith Richardson, said his company's "board of directors fought a hard battle to preserve the interests of all the shareholders. This has now been done."
Analyst Back said the Richardson family "definitely did not want foreign ownership. It would have been like the American Revolution was repealed."
He added that family members borrowed heavily to buy back stock and now risk having their potentially sizable profit taxed heavily under capital-gains rules. They will "have to do a lot of last-minute tax planning this year" to delay their gains, he said.
Analyst Back said that both companies have "gorgeous" balance sheets and "awesome borrowing power."
Moreover, he said, the companies will merge their worldwide distribution systems, a move that will result in savings for Richardson-Vicks.
Maker of Ivory Soap
In the fiscal year ended June 30, Procter & Gamble had net income of $635 million on sales of $13.6 billion.
Procter & Gamble's brands include Ivory soap, Tide laundry detergent, Comet cleanser, Crest toothpaste, Prell and Head & Shoulders shampoo, Charmin bathroom tissue, Crisco cooking oil and Folger coffee.
Richardson-Vicks reported net income of $71.9 million on sales of $1.2 billion in its latest fiscal year, also ended June 30. In addition to Oil of Olay, the company sells Nyquil and Vicks cold remedies and Clearasil acne medication.
"All of these products mirror-image Procter's distribution system," Back said. He said he anticipates "a little bit of antitrust flap" over the merger of the two companies' closely competitive hair-care lines.
Those include the Vidal Sassoon operation, purchased by Richardson-Vicks two years ago, that is based in Century City.
Help Overseas Image
Eileen Gormley, an analyst with Thomson McKinnon Securities in New York, said that Richardson-Vicks' strong international operations clearly "will bolster Procter & Gamble's overseas reputation" and that both companies will benefit from a weakening in the dollar.
Procter & Gamble's overseas operations contributed only 15% to 1984 earnings, whereas half of Richardson-Vicks' earnings came from abroad, she said.
The merger agreement with Procter & Gamble was reached four days after a federal judge ordered Richardson-Vicks to abandon a plan to issue new stock that would have carried extra voting rights--one of several defensive measures planned by Richardson-Vicks to thwart Unilever.
Unable to pursue that course, Richardson-Vicks apparently went looking for a "white knight." Pfizer Inc., a pharmaceutical company, and Colgate-Palmolive, a maker of consumer, health-care and household products, also were said to have been interested in buying the company.
RICHARDSON-VICKS AT A GLANCE In millions
Net Revenue income 1982 $1,116 71.9 1983 1,116 51.4* 1984 1,281 66.9
*Reflects accounting change Assets: $483 million Employees: 10,700