Wella Shareholders Demand EGM Over Corporate Governance Concerns

Wella Shareholders Demand EGM Over Corporate Governance Concerns


FRANKFURT, November 10 /PRNewswire/ -- - Shareholder group calls for vote of No
Confidence in Wella's CEO, and for 
an investigation into possible breaches of fiduciary duty



    Five of the minority shareholders in Wella AG (Frankfurt: WEL), the 
Darmstadt-based hair-care group in which Cincinnatti-based Procter & Gamble 
(NYSE: PG) acquired a controlling stake in September, have written to the 
Management Board of Wella to demand an Extraordinary General Meeting "without 
undue delay".


    In a letter addressed to Dr Heiner Guertler, Wella's chief
executive officer, the shareholders express concern at the way in which the
company has already been subject to various initiatives launched by Procter
& Gamble as the new majority owner. These initiatives appear in their view
to be aimed at activities that would be unlawful under Germany's Stock
Corporation Law, unless and until special provisions are made for the
protection of all those minority shareholders (accounting in aggregate for
around 20% of Wella's equity) who chose to reject Procter & Gamble's bid
for Wella earlier this year.



    The letter is accompanied by a proposed agenda, tabling
three resolutions:


    - a vote of no confidence in the chief executive officer, Dr
       Guertler;
    - an instruction to the Management Board to establish the
      appropriate legal basis for Wella's relationship with Procter & Gamble 
      as its controlling shareholder, by entering into a domination or profit-
      sharing agreement with Procter & Gamble and paying appropriate
      compensation to minority shareholders; and
    - an appointment of Special Auditors to investigate alleged breaches of 
      fiduciary duty by the Supervisory and Management Boards of Wella, during 
      the process of Procter & Gamble's Tender Offer and subsequent to it.




    The five signatories to the letter - Arnhold and S.
Bleichroeder, Elliott Associates, Paulson & Co. Inc., Perry Capital and
Stark Investments - are all international fund management companies, and
their holdings together represent approximately 9.0% of Wella's equity,
worth approximately EUR415m at today's market price.



    Simon Waxley of Elliott Associates, one of the signatories
of today's letter, said: "An Extraordinary General Meeting will allow us to
question Wella's senior management on a wide range of conflict of interest
and corporate governance issues that we believe are causing acute concern
to all the company's minority shareholders".


    Trudbert Merkel, a senior portfolio manager at Deka Investment, one of
Germany's biggest institutional investors, which is supportive of the
shareholder group's initiative, added: "The EUR1.5 billion offer made for
the 23.5m Preferred shares was unfair and simply not acceptable to Deka's
investors. The demand by minority shareholders for an Extraordinary General
Meeting is aimed at protecting our investment in the company. We want to
make sure that our management acts in the interest of all Wella's
shareholders, while of course ensuring that the company's assets and
intellectual property are not extracted for the sole benefit of the
controlling majority shareholder."


    Stephen Aulsebrook, co-chairman of the investment bank Close
Brothers which is advising a broad group of the minority shareholders,
concluded: "We are dismayed at the failure of Wella's Supervisory and
Management Boards to demonstrate to us that they will live up to their
obligations to continue acting on behalf of all the company's shareholders.
They have refused to have any constructive dialogue with minority
shareholders holding approximately US$ 1 billion worth of Wella's shares,
or to recognise the complex situation created by the rejection of Procter &
Gamble's tender offer by the majority of Wella's Preference shareholders.
Consequently, there has been no choice but to table these resolutions and
to seek to convene a special shareholders' meeting."

NOTES TO EDITORS


    1. P&G acquired control of Wella AG by purchasing the
founding family members' 34.2m Ordinary shares, representing 50.7% of the
equity and 77.6% of the votes. The price paid for each Ordinary share was
EUR92.25, making the deal worth EUR3.2 billion to the family. P&G's
subsequent offer of EUR92.25 for the remaining Ordinary shares and EUR65
for the Preferred shares was rejected by holders of 56.5% of the Preferred
shares, who now comprise the Minority Interest with 20% of Wella's total
equity. The offer for all of the 23.3m Preferred shares, representing 35%
of the equity, was worth a total of EUR1.5 billion.


    2. Germany's Stock Corporation Law requires that any
majority shareholder in a company must enter into an agreement with its
board in order to protect minority shareholders and creditors if the
majority shareholder intends to treat the company as a wholly-owned
subsidiary. Any such "Domination Agreement" that requires shareholders'
approval obligates the majority shareholder to provide full financial
compensation to the minority shareholders for the loss of their company's
independence. Professor Dr Hans-Joachim Mertens, one of Germany's leading
commentators on the Stock Corporation Law, has confirmed in a legal opinion
that the envisaged general integration of Wella's main functions and
business areas, in particular R&D, would be unlawful without a prior
Domination Agreement.


    3. Under German Law, an Extraordinary General Meeting can be
requested by shareholders holding 5% of a company's equity.


    4. Wella AG's Preferred shares are traded on the Frankfurt
Stock Exchange, where they closed on Friday 7th November 2003 at EUR68.



    Close Brothers Corporate Finance Limited, which is regulated in the
United Kingdom by the Financial Services Authority, is acting exclusively
for the Wella Shareholder Committee and no one else in connection with this
matter and will not be responsible to anyone other than the Wella
Shareholder Committee for providing the protections afforded to customers
of Close Brothers Corporate Finance Limited nor for providing advice in
relation to this matter. This announcement does not constitute and should
not be interpreted as a proxy solicitation, nor as a solicitation to buy or
sell securities in Wella or P&G (or any of their respective subsidiaries or
ultimate parent companies). The purpose of this announcement is merely to
communicate to the investor community the dissatisfaction of the Wella
Shareholder Committee with the terms of the P&G offer for the Wella
Preference shares which is now closed for acceptance and the subsequent
conduct of P&G and Wella. This announcement is not an invitation or
recommendation to accept or not to accept the P&G Offer or take any other
action with regard to the securities of Wella or P&G. Furthermore, each
member of the Wella Shareholder Committee reserves the right in the final
instance to act in its own best interests and in the best interests of its
fiduciaries with respect to their holdings of Wella Preference shares.




FOR FURTHER INFORMATION: Stephen Aulsebrook, Close Brothers Corporate Finance,
[phone] / [phone], Duncan Campbell-Smith, The Maitland
Consultancy, [phone]/ [phone], Brian Faw, Abernathy
MacGregor Group, [phone] / [phone]

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