Maybelline May Get Takeover Bid Topping That of L’Oreal
Maybelline Inc. said Friday that a German detergent and cosmetics company has expressed interest in making a formal takeover offer that would top a pending $660-million bid from L’Oreal.
The surprise move by privately held Joh. A. Benckiser, known for mass-market fragrance brands such as Coty and Jovan, illustrates the growing attraction of the U.S. mass-market cosmetics business. Products by Maybelline and others available at drug and discount stores are grabbing market share from more exclusive lines sold at department stores.
Benckiser’s proposition could set up a bidding contest with L’Oreal. Analysts predicted Benckiser could offer between $40 and $45 a share, topping the French cosmetics giant’s $36.75 bid, which Maybelline accepted in December.
“The stakes have just been raised, and Benckiser brought their checkbook to the table,” said Douglas Lane, an analyst with Merrill Lynch. “The next question is: Will L’Oreal strike back?”
In a letter to Maybelline, Benckiser said the offer it is prepared to submit “is materially higher than the offer from L’Oreal.” It said it “has in excess of $1 billion in cash on hand and financing available for the acquisition.”
Benckiser--presumably seeking an open, one-time auction where each party would submit its best and final offer--also said it would not bid if its offer would “simply be used to induce L’Oreal to match or better that offer.”
John Sullivan, spokesman for Cosmair Inc., L’Oreal’s U.S. subsidiary, said, “If Benckiser makes a proposal at a specific price per share, we will consider our alternatives and respond accordingly.”
A representative for investment company Wasserstein, Perella & Co., Maybelline’s largest shareholder, said Maybelline has not decided to take action regarding Benckiser’s letter because a proposed acquisition price was not specified. Wasserstein bought Maybelline in 1990 from Schering-Plough Corp. and began selling shares to the public two years later. It currently owns 29% of Maybelline.
In December, Benckiser had offered $36 a share for Maybelline, but that bid--which was not made public until now--was surpassed by L’Oreal’s.
Maybelline stock closed up 37.5 cents a share at $36.75 on Friday on the New York Stock Exchange. News of Benckiser’s move came just before the market’s close.
Analysts said Benckiser seeks Maybelline--whose brands include Great Lash mascara and Moisture Whip Lipstick--so it can beef up its presence on U.S. mass-market shelves and complement its fragrance lines.
But analysts expressed doubt about Benckiser’s ability to succeed in the competitive U.S. cosmetics industry. Benckiser does not currently have a U.S. color cosmetics line and thus cannot provide Maybelline with the added marketing clout that L’Oreal can.
“Benckiser is underestimating the amount of spending they will have to do,” said William Steele, an analyst with Dean Witter Reynolds.
Memphis, Tenn.-based Maybelline agreed to be acquired by L’Oreal for $510 million, with L’Oreal also assuming $150 million in debt. The transaction is being reviewed by the Justice Department for antitrust concerns. L’Oreal’s acquisition of Maybelline would place 82% of the $2-billion U.S. cosmetics industry’s market share in the hands of three major players. L’Oreal would be second, with a 28% share, behind Procter & Gamble (29%) and ahead of Revlon (25%).
