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Executive Summary

Unilever is willing to pay at least $1.3 bil. in cash to make Richardson-Vicks its major acquisition in the U.S. personal care products segment. The $18.8 bil. company unveiled an initial bid for Rich-Vicks ($54 per share in cash) on Sept. 9, after a weekend of contacts between Unilever and Rich-Vicks. Rich-Vicks rejected the Unilever bid, calling it "inadequate" on Sept. 9. The Rich-Vicks board further announced a stock repurchase plan to acquire up to five mil. shares, or over 20% of the approximately 23 mil. outstanding shares of common stock. Combined with existing Richardson family holdings, the repurchase plan would put more than 40% of the company's stock in control of family interests. The Rich-Vicks takeover maneuvering differs significantly from the other ongoing fight for corporate control in the cosmetics and toiletries business between Pantry Pride and Revlon. While Revlon is fighting a highly leveraged offer by a company with the espoused goal of breaking up more than half of the existing business, Rich-Vicks is posturing against one of the world's largest non-petroleum companies with an active interest in running Rick-Vicks' business. To Unilever, Rich-Vicks is an attractive U.S. acquisition with access to the drugstore distribution market. Unilever Looking For Same Synergies That Rich-Vicks Has Pursued -- On Larger Scale As a diversification move by Unilever in the personal care products area, the bid for Rich-Vicks would reflect on a larger scale a tack that Rich-Vicks has been pursuing on its own. To broaden its base in toiletries since the success with Oil of Olay, Rich-Vicks has been purchasing shampoo lines and testing new niches in the dental care area. Unilever's U.S. subsidiary, Lever Brothers, with its substantial position in toothpastes (Aim and Closeup), provides one of the extensions of the personal care franchise that Rich-Vicks has been seeking. Unilever pointed to the dental care area as a point at which the current Rich-Vicks and Lever operations dovetail. Unilever said: "Unilever's toothpaste business ties in well with the prominent position that Rich-Vicks occupies with its denture care products, Fasteeth, Fixodent and Kukident." Unilever added that Rich-Vicks' strength in drugstore distribution would complement its own distribution channels. "Unilever is strong in branded products for the mass market sold through the grocery trade, whereas Rich-Vicks also has a particular strength in specialized retail outlets such as drugstores," Unilever said in its Sept. 9 announcement. Unilever further maintained that Rich-Vicks will "be able to benefit" from the European firm's skin, hair, and dental care R&D. An acquisition of Rich-Vicks would add over $700 mil. in sales to Unilever's current U.S. business. Unilever already does about $3.8 bil. in business in the U.S. through Lever ($1.8 bil.), Thomas J. Lipton ($1.14 bil.), and National Starch ($843 mil.). Rich-Vicks has higher profit margins than the full Unilever operations on a consolidated basis. Rich-Vicks generated net earnings of $72 mil. in the June 30 fiscal year on $1.2 bil. in sales (a 5.9% after-tax margin). Unilever earned $583 mil. after taxes on $18.8 bil. sales (a 3.1% after-tax margin). Rich-Vicks' business is divided into three segments personal care (about 47%), health/cold products (40%), and chemicals/diagnostics and wood care (13%). Based on Rich-Vicks' trading price prior to the announcement by Unilever, the offer represents a premium of approximately 47%. The offer is also 18 times 1985 net earnings. To fund its defense, Rich-Vicks announced it had already arranged financing of $300 mil. to implement the buyback. The firm said it is studying "the possible use of other securities to acquire additional common stock and other methods to protect long-term stockholders' interests." Unlike Revlon, Rich-Vicks does not have a diverse corporate profile for defensive divestitures. Sale of the company's Baker Chemicals business could, however, be a source of cash to fight a takeover. To indicate the support of the Richardson family for the company's resistance to Unilever, Rich-Vicks declared: "Members of the Richardson family consider the company's stock to be an attractive investment." Chairman Stuart Richardson, 38, said that the family "intends to purchase additional shares to increase substantially our Richardson-Vicks common stock."(ITEM 150)]EDITORS' NOTE: Pantry Pride modified its tender offer for Revlon on Sept. 13, by lowering the per share price.[

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