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Wella Holdout Shareholders Seek New Deal

November 10, 2003

BERLIN (AP) _ Holdout shareholders in Wella AG, Procter & Gamble’s latest acquisition, stepped up their campaign for a fatter payoff Monday, claiming that P&G’s plans for the German hair-care firm oblige it to offer them better terms.

P&G concluded its takeover of Wella in September after buying out family shareholders, expanding its hair-care business in Europe. P&G has said it expects the combination to yield cost savings of $300 million ($345 million).

But minority investors holding about 20 percent of Wella’s capital turned down P&G’s offer of euro65 ($74.76) per preferred share, saying the 14 percent premium was insufficient. Five of them are accusing Wella’s management of neglecting their rights.

P&G has said Wella will continue to be a legally independent and publicly listed stock corporation. But the five rebel investors claim P&G plans a ``far-reaching integration″ of Wella that, under German law, would trigger a fresh offer to minority owners.

P&G spokesman Brent Miller said the Cincinnati-based consumer goods giant has already held off a string of shareholder challenges to the deal and had ``no intention″ of improving its offer.

The five fund managers and investment advisers, who include Arnhold & S. Bleichroeder and Perry Capital of the United States, claim P&G’s plans for Wella oblige it to offer ``suitable compensation″ to minority owners _ a lump sum or a share of profits.

In a statement Monday, the rebel investors said they had written to Wella chief executive Heiner Guertler demanding an extraordinary shareholders meeting to air their grievances.

They also proposed a vote of no-confidence in Guertler as well as an investigation of Wella’s management for suspected breach of fiduciary trust.

Such a meeting ``would allow us to call the management to account on a whole series of conflicts of interest,″ said Simon Waxley of Elliot Associates, one of the firms complaining.

The five signatories own about 9 percent of Wella’s capital. But they hold mostly preferred shares which carry no voting rights. P&G said in September it had secured 98 percent of the voting rights.

Wella spokeswoman Sabine Lohr said the firm’s executives received the letter Monday and were evaluating it. She declined further comment.

Regular shares in Wella were down 1.1 percent at euro88.00 ($101.22) in afternoon trading in Frankfurt. Wella’s preferred stock was little changed at euro68.40 ($78.67).

P&G shares were down 65 cents at $96.16 a share in midday trading on the New York Stock Exchange.

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