P&G; Agrees to Buy Max Factor for $1.14 Billion : Cosmetics: The deal with Revlon will turn Procter & Gamble into an overnight powerhouse in the mass marketing of cosmetics.

In a deal combining the smell of greasepaint and the color of money, consumer products giant Procter & Gamble agreed to spend $1.14 billion on Revlon’s historic Max Factor & Co. as well as Revlon’s German cosmetics subsidiary, the two companies announced Wednesday.

Founded 82 years ago to cater to the beauty needs of Hollywood’s upstart film industry, Max Factor is now a $600-million business and includes such brands as the Max Factor, Maxi and Mary Quant cosmetics lines, the California and Le Jardin fragrance lines, and SK-II, a leading skin treatment brand in the Far East.

The proposed cash purchase will turn P&G; into an overnight powerhouse in the mass marketing of cosmetics and give debt-heavy Revlon Inc. the money to begin paying off some of its more than $3 billion in bank debt and junk bonds.

Revlon had been rumored to be shopping most of its assets, and speculation was that P&G; and L’Oreal would be the most likely buyers. But in the announcement Wednesday, Revlon Chief Executive Ronald Perelman said the company will keep its core business, although it will investigate the sale of other assets.

By acquiring Max Factor and Revlon’s Betrix subsidiary in Germany, P&G; will gain a higher profile in the $16-billion worldwide cosmetics and fragrances industry that it entered only 18 months ago through its purchase of Noxell Corp., best known for its Cover Girl cosmetics and Noxema skin care lines. Analysts said the purchase gives P&G; an instant position in Europe and the Far East.

More than 80% of the sales of Max Factor and Betrix are outside the United States. “It gets them a dominant position in Japan and a big position in Europe, which Noxell didn’t bring to the party,” said Brenda Lee Landry, an analyst with Morgan Stanley.

“This acquisition is a good fit with our strategic game plan,” said Edwin L. Artzt, chairman and chief executive of Cincinnati-based Procter & Gamble.

“This transaction will benefit both companies,” Perelman said. “Revlon is receiving a fair price for these assets, while Procter & Gamble is acquiring two first-class operations with internationally known brand names and strong market positions.”

Wall Street was less enthusiastic. P&G;’s stock slipped 87.5 cents to $83.50 Wednesday on the New York Stock Exchange.

Cosmetics industry consultant Alan Mottus said the addition of the Max Factor lines will leave P&G; with about 34% of the mass-merchandise cosmetics market. Those are cosmetics sold through drugstores, supermarkets and mass merchandisers rather than through department stores. P&G;’s Cover Girl line is now the market leader with 23%, and its Clarion lines hold about 6% of the market.

Mottus noted that the already-competitive industry has been hurt by the recession.

Beyond the specific brands and organizations, P&G; is getting manufacturing plants in Japan, Britain, Germany and Mexico, leased administrative facilities and production equipment. P&G; and Revlon are continuing to discuss an arrangement under which Revlon’s U.S. factories would continue to manufacture Max Factor products for the next few years, a Revlon spokesman said.

In 1990, New York-based Revlon had international sales of $2.6 billion. Betrix has annual sales of $195 million. The privately held parent company, which also owns such names as Almay, Ultima II and Charles of the Ritz, doesn’t report earnings. Together, Max Factor and Betrix account for about 30% of Revlon’s sales.

P&G; had worldwide sales of $24.1 billion in the fiscal year ended June, 1990. Its many other products include Pampers and Luvs disposable diapers, Tide detergent, Crest toothpaste, Scope mouthwash, Jif peanut butter and Hawaiian Punch.

Max Factor was once a wig maker and makeup artist for the Royal Ballet in czarist Russia, but shortly after setting up shop in Los Angeles in 1909 was making wigs for the stars--including four-footed ones--of Hollywood’s early days. He turned to makeup during the next few years, and his fame grew.

Factor’s innovations included human-hair false eyelashes, eye shadow, lip gloss, the eyebrow pencil, the lip brush and the use of the word makeup as a noun. Factor’s sons took over the business after his death in 1938.

Max Factor & Co. has been sold several times since the family left the business in 1973. But through it all, the company has held onto the 55-year-old Max Factor building in Hollywood, considered one of the world’s leading examples of the Art Deco Regency style.

Since 1984--the same year Max Factor & Co. fled for Connecticut, only to return three years later--the building’s lobby has been home to the Max Factor Museum of Beauty on the site of Factor’s original salon to the stars.

Factor’s varied talents were even called upon to fashion fur underpants for the chimpanzees in Tarzan movies, a feat immortalized in the 1938 song “Hooray for Hollywood”:

If you want to be an actor/

Go see Mr. Factor/

He can even make a monkey look good.

Hooray for Hollywood.