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Executive Summary

Rich-Vicks is going to Procter & Gamble for $1.2 bil. or about 17 times the firm's 1985 net earnings of $72.2 mil. The $69 per share "white knight" bid works out to a substantial premium over P&G's last acquisition in the health care area, the 1982 purchase of Norwich Eaton for $371 mil. or about 17 times Norwich Eaton's $21.9 mil. operating earnings before the acquisition. The Rich-Vicks deal differs from Norwich-Eaton in at least two major points: (1) the active Unilever bidding for Rich-Vicks which started "white knight" offers at a higher level, and (2) Rich-Vicks broader range of products and better product franchises than Norwich. Despite the differences, the higher price for Rich-Vicks indicates the recent inflation in the price of consolidation in the toiletries and health care fields. The P&G offer, in fact, is less as a ratio to net earnings than the Monsanto price for Searle in late July. Based on Searle's mid-year 1985 earnings, that price would be about 18.8 times full-year earnings. The P&G purchase, and the company's quick response to indications that Rich- Vicks was seeking help to avoid Unilever, is being hailed as a sign of a new approach to growth by the consumer products firm. Since the 1982 purchase of Norwich, however, P&G has been an active searcher in the health care field. In the Norwich case, P&G acted just as quickly in making a successful bid within two weeks of Morton-Norwich's open acknowledgement that the drug business was for sale. While P&G still needs more bulk to participate more fully in the Rx field, the Rich-Vicks deal will probably take them out of the market for acquisitions in the short-term. P&G's Winning Bid Topped Unilever's $60 Per Share Offer By Richardson Family Will Split $445 Mil. Under the Oct. 1 merger announcement between P&G and Rich-Vicks, P&G will initiate a cash tender offer (probably the week of Oct. 6) to be followed by a merger at the $69 per share price. The offer represents a $9 per share premium over Unilever's last public offer of $60. In an Oct. 2 statement conceding defeat, Unilever said it was "disappointed" with the outcome, but added that the $1.2 bil. price tag "exceeded the value of the business to Unilever." The company also congratulated Rich-Vicks for earning the higher bid. The Richardson family will receive about $445 mil. from the sale. Among the lock-up provisions of the P&G offer is a separate deal for the Oil of Olay franchise, marking it as a key to the deal. P&G also got an option to purchase nearly 4.4 mil. shares of new stock from Rich-Vicks and 6.3 mil. from the Richardson family to prevent intrusion into the deal by a third party. Ironically, the P&G/Rich-Vicks deal occurred within a week of the agreement in principle for the purchase by Philip Morris for General Foods, a merger which would replace P&G as the largest U.S. consumer products company. UNILEVER's CONCESSIONARY STATEMENT ON RICH-VICKS/P&G MERGER "Unilever. . .is disappointed in not being able to consummate a transaction that it believes would have benefitted both companies in view of the outstanding fit of the two businesses. However, the price obtained exceeded the value of the business to Unilever. Unilever congratulated the Richardson-Vicks board on obtaining such a full price for all its stockholders."

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