Dep Settles for $3.9 Million in Trademark Suit

Dep Corp., the Rancho Dominguez firm best known for its gooey hair gel, said Friday that it will receive $3.9 million from an out-of-court settlement of trademark litigation with S.C. Johnson & Son Inc.

Dep, which emerged from Chapter 11 bankruptcy protection in November, said the agreement ends all fraud and libel claims between the companies. Dep filed suit over disputes involving its $45-million purchase of Johnson’s Agree and Halsa shampoo brands in 1993.

“It’s a nice little Christmas present,” said Robert Berglass, president and chairman of Dep. “The company has spent a great deal of money on legal fees and, obviously, a great deal of time. The feeling was that we should just get on with our business. It was in the best interest of the shareholders to do that.”

Dep sued Racine, Wis.-based Johnson in 1994 for breach of contract, claiming it hindered future sales of Agree and Halsa by halting advertising of the brands before Dep acquired them. After the acquisition, sales of Agree and Halsa dropped to less than $25 million a year from $65 million a year, Berglass said.

Dep has been losing money virtually ever since it bought the lines. Those losses put it out of compliance with its loan agreements, which caused its interest rates to rise sharply. The company said it was forced to resort to the Chapter 11 filing in April to gain breathing room to renegotiate its debt.

“They paid . . . for a dying business,” said Michael Shonstrom, director of research at Neidiger, Tucker, Bruner Inc., a Denver-based investment research firm. “They still have a difficult issue with the interest costs that they’re carrying. Their revenues are flat.”

Johnson will pay Dep $2.5 million and Dep’s insurance carriers will pay $1.4 million. Johnson also will forgive $1.4 million of debt it claimed Dep owed in a collection suit filed after the initial dispute.

Dep said it will use the money to pay off debt and market its products.

In October, a new Dep skin-care line was recalled for repackaging after rival Estee Lauder Cos. claimed the Basique products too closely resembled its own Clinique line. The recall cost Dep $600,000.

Dep “can be profitable at some point in the future,” Shonstrom said. “Certainly, the money they picked up will reduce their debt somewhat, but they are still pretty heavily leveraged.”