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L’Oreal to Buy Maybelline for $660 Million : Cosmetics: The French company, already the industry’s largest, would get a much bigger share of the U.S. market.

From Times Wire Services

French cosmetics giant L’Oreal said Sunday that it plans to acquire U.S. rival Maybelline Inc., the third-largest U.S. maker of beauty products, in a stock and debt transaction valued at $660 million.

The deal would further solidify Paris-based L’Oreal’s position as the world’s largest cosmetics maker and would catapult it ahead of No. 1 Procter & Gamble Co.'s Cover Girl brands and No. 2 Revlon Inc. It would have about a third of the U.S. market, compared with about 8% now.

Cosmair Inc., the principal North American subsidiary of L’Oreal, would acquire all outstanding Maybelline common stock for $36.75 per share in cash, or about $510 million. Cosmair would also assume $150 million in debt. L’Oreal will commence a cash tender offer within a week for all of Maybelline’s approximately 14 million shares.

The stock portion of the transaction is a premium of more than 18% over Maybelline’s closing price Friday of $31 per share, up 75 cents on the New York Stock Exchange. The deal is expected to close early next year.

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Maybelline’s largest shareholder, Wasserstein Perella & Co., a New York-based investment company, has agreed to sell its 3.8 million shares, or 29% stake, in the company, L’Oreal said.

Memphis, Tenn.-based Maybelline leads in the mass-market color cosmetics business. Its products include Great Lash mascara, Revitalizing makeup and Yardley of London. The items are sold in about 100,000 discount stores, supermarkets, drugstores and other mass-market outlets in 40 countries. For 1994, Maybelline earned $16.6 million on sales of more than $351 million.

L’Oreal makes L’Oreal, Lancome and Biotherm cosmetics, and its perfumes include prestige brands such as Ralph Lauren, Giorgio Armani and Paloma Picasso. The company has 40,000 employees and operates in 150 countries.

L’Oreal posted 1994 sales of more than $10 billion; its Cosmair unit had $1.4 billion in U.S. sales for the year.

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“Maybelline’s cosmetic line will be a complement to L’Oreal’s cosmetic brands, which are higher-priced, have more selective distribution and appeal to a different consumer,” L’Oreal said in a statement.

“The L’Oreal offer recognizes the unique value of Maybelline and its strong operating results and market position,” Maybelline Chairman Bruce Wasserstein said. “The combination of Maybelline with L’Oreal will ensure the continued success of the Maybelline brand for many years to come.”

The acquisition of Maybelline would give L’Oreal a “significant position in the broadly distributed color cosmetic market in the U.S., comparable to the position it has achieved in France, Belgium, Switzerland and Italy, and in Germany with its recent acquisition of the Jade brand,” L’Oreal Chairman Lindsay Owens-Jones said.

The acquisition in October of Jade gave L’Oreal a 21% share of the cosmetics market in Germany, which is the third-largest after the U.S. and Japanese markets.

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The Maybelline acquisition would create a number of marketing benefits, the most important being a stronger position in the war for store shelf space, said Craig T. Weichmann, an analyst at Morgan Keegan & Co. in Memphis.

The $36.75-a-share price is an excellent one for Maybelline, whose stock has never exceeded $34, Weichmann said. “For someone to pay that high a price, there has to be a strong strategic gain from it,” he said.

Wasserstein’s investment in Maybelline paid off even before L’Oreal agreed to buy it, Weichmann said. “Wasserstein was able to make back the initial investment” when the company bought back shares last year, he said. That brought Wasserstein’s cost-basis down to zero, and since then “they’re just playing with the profits.”

Wasserstein Perella bought Maybelline from Schering-Plough Corp. for about $300 million in a leveraged buyout in 1990. Wasserstein Perella sold 30% of the company in an initial public offering in December 1992. A spokesperson for Wasserstein Perella said Bruce Wasserstein will step down as Maybelline’s chairman.

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Maybelline will become a separate division of Cosmair “with its own personality,” Cosmair spokesman John Sullivan said. He said the company has no “definite plans” for staff cuts.


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