CINCINNATI - Procter & Gamble Co. agreed yesterday to acquire Bristol-Myers Squibb Co.'s Clairol unit for $4.95 billion to begin selling hair coloring, a market with sales growing twice as fast as household products.
Clairol's Nice'n Easy, Natural Instincts and Miss Clairol brands will give Procter & Gamble the No. 2 position in the U.S. hair-color market. The cash acquisition is the biggest in Procter & Gamble's 164-year history and will add $1.6 billion in annual sales, the company said.
Chief Executive Officer A. G. Lafley, who has tried for almost a year to find products to revive Procter & Gamble's sales and stock, plans to tap into aging baby boomers' demand for hair tints and dyes and to expand distribution of Clairol worldwide. Procter & Gamble shares fell because Clairol has been losing sales to rival L'Oreal SA, and the purchase will reduce profit in the first year.
"The timing is awful," said analyst Chris Delpi of Glenmede Trust Co., which owns more than 900,000 Procter & Gamble shares. "Here we go again, having to revise down earnings. Clairol has been a neglected brand, and it may take two or three years to turn around."
Shares of Procter & Gamble, the largest U.S. household products maker, fell $2.23, or 3.3 percent, to close at $65.25. They had fallen 43 percent since January 2000 on concern about rising costs and lower-than-expected sales. Bristol-Myers fell 71 cents to $55.29.
Bristol-Myers Squibb sold Clairol to focus on its pharmaceuticals business. The New York-based company may use proceeds from the sale to increase the development and marketing of drugs and to possibly make acquisitions, analysts said. Spokesman Charles Borgognoni couldn't immediately be reached.
To win Clairol, Procter & Gamble topped a bid by Tokyo-based Kao Corp. The purchase will cut earnings by 6 cents to 8 cents a share in the first year, Procter & Gamble said. The Cincinnati-based company expects Clairol to add to profit in the second year.
Clairol lost its U.S. market leadership two years ago after L'Oreal introduced a line aimed at black and Asian women and men and Clairol cut marketing spending. The business had 39 percent of the women's hair-color market in the 13 weeks ended April 21, trailing L'Oreal's 50 percent, according to ACNielsen.
Procter & Gamble will expand distribution for Clairol, which gets 75 percent of its sales in North America. About 70 percent of Procter & Gamble's hair-care product sales come from outside North America.