Unilever to pay $770m for US hair-care group

NIGEL COPE

Unilever, the detergents and consumer products giant, added to its recent flurry of acquisitions yesterday when it announced a $770m deal to buy the American hair-care group, Helene Curtis.

Helene Curtis is a manufacturer of shampoos, conditioners and styling products which include Salon Selectives, Quantum and Finesse. It also has deodorant brands, Degree and Suave.

The agreed $70-a-share offer will give Unilever a far greater presence in the US hair-care market, where it has been a minor player so far.

Yesterday the company claimed that it would now rank as number two in the global hair-care market behind L'Oreal and ahead of its US rival Procter and Gamble. In the American market it will be the largest ahead of P&G.

Unilever has paid a hefty price for the company as Helene Curtis shares were trading at just $59 before news of the deal emerged. However, most analysts supported the logic of the deal.

Unilever, under chairman and chief executive Niall Fitzgerald already owns the Sunsilk and Organics shampoos and Sure deodorant. In the US its Chesebrough-Pond's subsidiary includes Pond's Vaseline and Mentadent toothpaste.

Helene Curtis has strong brands but has been under-performing. Last year the company made profits of just $36m on sales of $1.3bn. Unilever is expected to use its marketing muscle to improve the performance. It is not yet clear whether jobs will be lost as a result of the deal. The company employs 3,300 staff world-wide, of which 2,200 are in the US. It only has a modest presence in the UK where it has sales of around pounds 20m.

The success of the deal depends on the agreement of the Gidwitz family, which owns a controlling shareholding in the company.

The deal, which is subject to regulatory approval, follows the pounds 74m purchase of the Irish arm of Lyons, the tea producer, earlier this month.

In January it paid pounds 360m for Diversey, an American manufacturer of industrial cleaning products. Last week it announced a pounds 225 restructuring to cover the cost of production line closures in the US.

The company reports its annual results next week.

Analysts said Unilever's acquisition of Helene Curtis was "a good fit" for the Anglo-Dutch firm.Sally Jones, analyst at Credit Lyonnais Laing, said that on a price-to-sales analysis Helene Curtis was a "good buy" for the company.

Charlie Mills, analyst at UBS, said the personal products sector had seen a great deal of consolidation recently. Although he agreed that the purchase made sound business sense, Mr Mills added that Unilever was a very large operation and it would take a "very substantial" acquisition to move its earnings substantially.

He said any change in analysts' forecasts for 1996 would depend on whether Unilever made another exceptional restructuring charge.

Bonita Austin, analyst at Prudential Securities, discounted suggestions of a rival bidder. "There has been ample opportunity for somebody else to make an offer for the company if they wanted to. The other thing is Unilever has an agreement with the Gidwitz family to buy family shares of stock. If they can get that, they'll have the company locked up."

Investment Column, page 22