Merger of Wella - P_G1

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Analysis Of The Strategic And Economic Rational Behind The Acquisition Of Wella AG By Procter & Gamble.

Transcript of Merger of Wella - P_G1

Analysis Of The Strategic And Economic Rational BehindThe Acquisition Of Wella AG By Procter & Gamble.

Prepared by Carlos U. FloresDecember 13th, 2004

TABLE OF CONTENTS

COMPANY OVERVIEW 3

History of the companies 3Wella AG 3

Procter & Gamble 4

Company strength and weaknesses 5Wella AG 5

Procter & Gamble 5

Description of products 5Wella 5

Procter & Gamble 6

Market Shares and Distribution channels 7

Discussion of Synergy 7

INDUSTRY ANALYSIS 8

Overview 8

Sector Analysis 8

Professional hair care 8

Consumer hair care 9

Fragrances 9

Role of Merger & Acquisition in corporate strategy 9

RECENT HISTORY LEADING TO THE MERGER 10

STANDARD RATIO ANALYSIS 13Growth rates 13

Risk analysis 14

Profitability Analysis 15

ANALYSIS OF THE VALUE PAID AND THE MODES OF PAYMENT 18

Description of the deal and analysis of valuation 18

Transaction structure 18

Mode of Payment 22

POST MERGER PERFORMANCE 22

Summary and Conclusion 22

APPENDIX 23

Financial Statements 23

Wella AG Forecast 30

Wella Valuations 35

Wella AG Forecast based on €300M synergies estimated by P&G 36

WELLA VALUATIONS BASED ON €300M SYNERGY ESTIMATES 41

BIBLIOGRAPHY 42

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Company Overview

History of the companies

Wella AGFounded in 1880, by Franz Ströher Wella AG is a leading beauty care company. Mr. Ströher started his business in 1880 at age 26, producing colored wigs and related products directed to trends of imperial Germany. Mr. Ströher first commercial success came with the invention of the tullemoid, a base upon which wig hair could be easily attached. The invention transformed wig making and allowed the company to open its first factory in Rothenkirchen in 1904 and four years later, Franz-Ströher OHG, was listed as a publicly traded company.

Franz-Ströher OHG acquired a license to produce perming appliances in 1924, the same year the Wella trademark was registered with the German patent office. By 1927 perms were all the rage among stylish women, and the company's machines were sold together with complementary hair cosmetics.

By 1931, Wella Corporation, started operations within the US as other Wella businesses sprang up in Europe. Its hair care products, cosmetics, and appliances were top sellers, and the firm enjoyed a period of expansion until World War II reversed the company's fortunes since during this period Wella's overseas patents and subsidiaries were lost.

In 1945, after the end of the war, Franz two sons George and Karl along with 12 former employees, gathered to begin a new company called Ondal and a year later Wella Fiseurbedarf was founded in Berlin.

Demand for hair and beauty services gradually returned and the company supplied the growing international market. By 1950 headquarters were moved to Darmstadt, and the company became known as Wella AG. Products such as Koleston, a hair colorant, enjoyed global success. The company continued to expand throughout the 1960s, and by the end of the decade its products could be found almost anywhere in the world.

By the ‘70’s Wella was consolidated as a global corporation, during that time members of the founding family, now in its third generation, decided to reduce its role in the company and delegating day-to-day management responsibilities to a group of outside directors.

Wella celebrated its 100th anniversary in 1980, the same year it purchased Tondeo-Werk, a producer of scissors and hairdressing supplies in Solingen, Germany. Wella went public in the German stock exchange in 1983.

In the ‘90’s, following German reunification, the company bought back operations it had lost. Wella also, initiated operations in the former Soviet Union and acquired 91% of Muehlens AG to boost its fragrance business. In 1995, Jorg von Crausharr became chairman of the company's management board. After a major drop in sales that year, the company posted consecutive gains through 1999.

In 2000 Heiner Gürtler succeeded von Crausharr as chairman. The following year the company acquired Graham Webb International, the fifth largest hair care products manufacturer in the US and in 2002 bought fragrance maker Escada Beauté Group S.A. as well as partnered with haircolorxpress International. Wella also acquired 75% ownership of Tony & Tina cosmetic brands and the brands and business operations of Italian fragrance and cosmetic company, Atkinsons.

In 2002 Wella combined its two US divisions, Intercosmetics and Adipar Ltd./Escada Beauté, naming it Cosmopolitan Cosmetics Inc. Later that year it formed a joint venture with Italian beauty-products

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firm Max Mara to develop, manufacture, and distribute fragrances and cosmetics under its Cosmopolitan Cosmetics name.

Procter & GambleProcter and Gamble (P&G) was founded in Cincinnati in 1837 with the merger of Candle maker William Procter and soap maker James Gamble, which incorporated in 1905. By 1859 P&G had become one of the largest companies in Cincinnati, with sales of $1 million.

P&G introduced Ivory®, a floating soap in 1879, this introduction was revolutionary because it was one of the first to advertise directly to the consumer. Other advertising innovations included sponsorship of daytime radio dramas in 1932. P&G's first TV commercial, for Ivory®, aired in 1939.

Members of the Procter and Gamble families headed the company until 1930, when William Deupree became president, position he held for the next 29 years. During Deupree leadership, P&G became the largest US seller of packaged goods.

During the next three decades P&G introduced Tide® detergent (1947), launched Crest® toothpaste (1955) and Head & Shoulders® shampoo and Pampers® disposable diapers (1961). During the same period the firm also began a string of acquisitions starting Spic and Span® (1945; sold 2001), Duncan Hines® (1956; sold 1998), Charmin Paper Mills® (1957), and Folgers® Coffee (1963).

In 1985 P&G moved into health care when it purchased Richardson-Vicks (NyQuil®, Vicks®) and G.D. Searle's nonprescription drug division (Metamucil®).

The acquisitions of Noxell (1989; Cover Girl®, Noxzema®), Max Factor (1991) and Clairol (2001) made it a top cosmetics company in the US.

In 1997 it acquired Tambrands (Tampax® tampons), making P&G #1 in feminine sanitary protection.

Impatient with progress on its sales goals, in 1998 P&G began restructuring to focus on global business units rather than geographic regions. Chairman John Pepper handed over his chairman and CEO title in 1999 to president Durk Jager, who promised five new products a year and a shakeup of the corporate culture. In 1999 the company announced further reorganization plans, including 15,000 job cuts worldwide by 2005. That same year P&G bought The Iams Company (maker of Eukanuba®- and Iams®-brand dog and cat foods).

With earnings flat, Jager resigned in 2000. P&G insider Alan G. Lafley immediately assumed the president and CEO duties, and Pepper returned to succeed Jager as chairman. With Mr. Lafley in charge of the company, P&G announced in 2001, job cuts and cost reductions. It also sold its Comet cleaner business.

In 2002 P&G closed three plants, one warehouse, and one distribution center -- eliminating about 750 jobs-- it sold its Jif® peanut butter and Crisco® shortening brands to J.M. Smucker and several personal care brands (including Sea Breeze and Vitalis) to Helen of Troy. In 2002 P&G branched out in a joint venture with Clorox® to help it improve the Glad-brand plastic bags and wraps. P&G holds a 10% stake in the Glad® venture.

In December 2002 Lafley announced that P&G had completed its multiyear restructuring and would stop reporting two sets of results (one with restructuring charges and one without).

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Company strength and weaknesses

Wella AGWella AG is a leading beauty care company selling its products in more than 80 countries.  The company's three divisions include professional hair care, retail hair care and cosmetics, and fragrances. The firm’s major strengths are its strong presence in Western Europe, Asian and Latin America markets and its expertise and recognition in the market segments it covers.

The transformation into a mature company and overall projected slower growth forecast within the segments it participates constitutes Wella’s major weaknesses and treats respectively.

Procter & GambleP&G, is the global leader in consumer products, the company emphasizes its growth on balance across brands and categories, across retail customers and channels, and across geographies. P&G is well-positioned in an industry that rewards branding and innovation.

The company continues to strengthen its brands by using more creative, experiential, consumer-driven innovation and marketing approaches. The company has 16 brands generating $1 billion in sales a year and other 10 generating at least $1.5 billion. Most P&G brands are leaders in their respective categories; furthermore, the company emphasizes in innovation as the primary driver of sales and earnings growth in virtually all consumer product good categories.

P&G combined historical innovative capabilities with its developing and branding strategies to create new internal and external linkages across technologies, disciplines, geographies and businesses constitute P&G main strengths.

The firm’s considerable size and its ability to effectively and efficiently manage its portfolio of brands constitute P&G’s major weakness; the firm has been subject of constant restructuring since 1993. The degree to which they can materialize improvements in its operations will guarantee the growth of the firm.

Description of products

Wella The company's produces, licenses, distributes and sells professional and retail hair care products, cosmetics, and fragrances in 5 continents. Wella’s businesses are divided within the company in three divisions: 

1. Professional hair care: the division produces 50% of the company revenue, it comprises color, perm, styling and care as well as comprehensive services for salon owners and their employees. The full-service range is completed by the brand’s salon equipment and hair cutting equipment. Some of the brands under the professional hair care unit are: Wella®, Koleston®, Sebastian®, Graham Webb®, High Hair®, Londa®, Kadus®, Welonda® and Belvedere®

2. Consumer retail hair care: accounting for the firm’s 30% on revenues, its main target is hair color segment. Under this product category we also find styling and care products. Some of the brands under consumer retail hair care are: Wellaflex®, ShockWaves®, Ultra Sheen®, Londa®, Gentle Treatment®, Nicky Clarke®, Decoré® and Vivality®;

3. Fragrances is the smallest unit in the group with 20%, organized by the holding company Cosmopolitan Cosmetics GmbH, is a leading product supplier on the international fragrance

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market comprised by: Gucci®, Rochas®, Escada®, Montblanc®, Dunhill®, Anna Sui®, Escada®, Cindy Crawford®, Mexx® and 4711®.

Table 1

Division Sales EBIT(a)

Professional Hair Care 47.4% 73.4% 13.9%

Consumer 30.6% 16.6% 4.9%

Fragance& Cosmetics 32.0% 22.4% 9.1%(a) Sums over 100% as EBIT includes some unallocated expenses

Source: Wella 2002 Annual Report

% of 2002 2002 EBIT Margin

Sales and Profit Breakdown Wella AG

Procter & GambleP&G is a true giant, the firm has over 160 brands world wide, and distributes its products in more than 150 countries world wide. The company divides its products offerings in the following segments:

1. Home products: this segment is divided between Fabric care and Home care products. Within the Fabric care business P&G is the market leader with more than a 31% market share of the $40 billion category and continues to be a dominant player with brands like Tide®, Downy® and Ariel®. Within the home care business the company distributes dish care, household cleaners and paper products, some of the most dominant company’s brands within the sector are Swiffer®, Febreze® and Mr. Clean®.

2. Personal and Beauty: P&G manufactures and distribute products in various lines including antiperspirants and deodorants, colognes, cosmetics, feminine protection, hair care, hair color, personal cleansing, fragrances and skin care. The beauty care line includes 3 billion- dollar brands, Pantene®, Always® and Oil Olay®. Furthermore P&G’s Pantene® brand is the world’s leading hair care brand which combined with Head & Shoulders, make the firm a retail hair care product powerhouse. Some additional relevant brands within this unit are: Clairol®, Herbal Essences®, Cover Girl®, Max Factor®, Noxzema® and Old Spice®.

3. Health Care: P&G participates in the Pharmaceuticals with its Actonel® brand. But the flag ship of this unit is the Crest® brand which is number one in the U.S. in the tooth paste segment. Furthermore P&G has recently acquired success with the Prilosec® brand which is gaining market share in the over the counter acid prevention market and Iams®, which for third consecutive year is the number one pet nutrition brand in the U.S. market.

4. Snacks and Beverages: the company two main brands in the in this segment are Pringles® and Folgers®, which holds leadership market share in the U.S. with 32%.

5. Baby and Family Care: P&G owns the market leader diapers Pampers® and Luvs®, specially formulated detergent for baby clothes, Dreft® and pre-moistened flushable wipe Charmin®.

Table 2

% of totalPersonal & beauty 33

Home products 27

Baby & family care 20

Health care 13

Snacks & beverages 7

Total 100

2002 Net Sales

Source: P&G annual Report

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Market Shares and Distribution channels

Professional salon hair care represents a market with sales of $10 billion globally. Wella estimates it has a 22 percent global share of the market, which places the company in the number two position in the world.  P&G, through its Clairol brands, has a relatively small professional presence in North America and no presence in the rest of the world.

The global retail hair care market is a $34 billion industry. In this segment P&G has annual sales of more than $4.5 billion with leading brands such as Pantene®, Head & Shoulders® and Herbal Essences®.  Wella is complementary to P&G from both a geographic and category perspective, since P&G lacks a strong presence in western Europe and Asia, and has little presence within the hair care category.

The size of the global fine fragrance market is approximately $20 billion.  Wella's and P&G's combined sales in fragrances are more than $1.0 billion.  Wella markets several brands that are, or have the potential to become, classics fragrances, marketed primarily to females, which complement P&G's male-oriented fragrances. Both firms have presence in global markets.

Table 3

Product LineNorth

America EuropeLatin

America AsiaShampoo/Conditioner P&G # 1 P&G # 2 P&G # 2 P&G # 1

Color P&G # 2 Wella # 3 Wella # 1 Wella # 1

Styling P&G # 1 Wella # 2

Source: P&G 2003 annual Report - Wella 2002 Annual Report

P&G and Wella AG Market Share Positions – Complementary Business Portfolio

In perspective, Procter & Gamble acquisition of Wella enhanced consumer product giant’s presence in Western and Eastern Europe and Latin America. Furthermore it provides entry to the professional hair care products category, and strengths P&G’s position on the retail hair care and fragrance market.

Discussion of SynergyThe P&G and Wella merger is highly synergistic, with global geographic scale and the potential to generate significant efficiencies.

Based on P&G’s estimates the acquisition is expected to contribute about € 3.5 billion in sales to P&G's overall beauty business, based on approximately €1.6 billion in the professional hair care segment; €1.0 billion in the retail hair care segment; and € 900 million in fragrances.  Synergies to be gained from the combination of P&G and Wella are projected to be at least € 300 million by the third year. 

Wella is a leading beauty and hair care company with strong brands, knowledgeable management and an organization with deep expertise in the beauty business, the acquisition is a great strategic fit given P&G's leadership and proven strength in its core hair care business. Furthermore, the merger with Wella will help P&G drive innovation across the entire hair care portfolio and further expand the firm’s beauty businesses across Eastern and Western Europe, and in Latin America.

P&G and Wella are in highly complementary businesses, Wella's strength in professional hair care complements P&G's strength in retail hair care.  Wella's strength in color and styling complements P&G's strength in shampoo and conditioners.  Wella's fragrance business is targeted mainly to females while P&G's is geared toward males, Wella's strength in Europe, Asia and Latin America

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complements P&G's strength in North America and the United Kingdom.  By bringing these complementary businesses together, there are significant opportunities for top and bottom line growth in hair care.

Furthermore cooperation in the purchasing area will deliver synergies for both companies by leveraging economies of scale in the purchase of raw/packaging materials, goods and services enabling both companies to be more competitive with the marketplace.    

Industry analysis

OverviewSales to the end-consumer both in consumer as well as cosmetics and fragrances businesses, has been subject to increasing consolidation on the demand side. Most competitors had been internationalized by mergers, joint ventures or licensing agreements. Therefore market participants are characterized by having a brand portfolio with an international focus.

Maintaining and improving current position in the international hair care market and developing expertise in the area is the focus to maintain a strong presence in the business.

Cosmetics and fragrance business are subject to increasing competition and shorter product life-cycles. In order to counter these obstacles, firms had been forced to increase the number of launches of new and appealing fragrance lines each year and ensure that they are widely distributed.

Global professional hair care market continues to be highly specialized with relatively small number of participants.

Furthermore, analyzing the German industrial landscape, Henkel made a bid to acquire Wella as a way to gain enough capacity to secure long-term growth in the sector, especially when P&G acquired Clairol in 2001. Given that P&G ultimately gain control of Wella, is expected that Henkel continues to seek an attractive acquisition to boost growth of their Schwarzkopf brand, which has about 6 per cent of the global wholesale hair care market.

Sector Analysis

Professional hair careProfessional hair care market is a specialized market segment catering to salons. The industry is dominated by a small number of participants including Alberto Culver, Wella, Beiersdorf, Estée Lauder, John Paul Mitchell and L'Oréal. The segment is particularly unique and is characterized by the close relationship between supply firms and customers through a deep network of industry professionals. Product development usually takes place based on the feedback and close relationship with the customer, and market participants usually provide a wide array of equipment, services and products to the channel.

With annual industry growth of 5% globally the professional hair care business, is dominated by L’Oreal which in 2002 had an estimated 29% market share of the professional hair care market, which represented a $10 billion market share growing at about 5%1.

Latin America constitutes to the smallest professional market geographically but faces the highest growth rate in the world. North America continues to be the larger market for the segment and the Asia/Pacific region is experiencing e recorded growth of 2% in 2002. Growth in Europe, especially

1 Goldman Sachs Global Equity Research

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Eastern Europe, its increasing from figures obtained in 2001 and 2000.2

Hair coloring products account for 39% of the global professional hair care market and care products (shampoos, treatments and conditioners) represent a further 33%. Styling products (hair sprays, styling mousses, gels and waxes) and perm products follow with 19% and 9% respectively.

Consumer hair careThe global consumer hair care market is a highly fragmented environment dominated by multinational powerhouses. The industry is characterized by large investments in marketing campaigns and brand management. The leaders in the industry are Estée Lauder, Johnson & Johnson, L'Oréal, Revlon, Schwarzkopf & DEP, Unilever, Wella and P&G. Growth in the segment was 5% in 2002 and is projected to continue in single digits.

Care with a share of 58% form the largest segment in the global consumer hair care market, followed by hair coloring products with 22% and styling products with 18%. The segment comprising “others”, especially perm products and hair tonics, accounts for 2% of the market. Demand for hair colors in the consumer segment is the highest growing sector, with permanent hair colors in particular contributing to this momentum. Growth for styling products is the slowest of the segments, with styling aids (such as gels and wax) recording the slowest growth.

FragrancesThe fragrances market is characterized by licensing agreements and joint ventures. The segment had a 2% growth in 2002, down from 3% growth in 2001. This segment was highly affected by the events of September 11th, 2001 as the travel retail decreased. Furthermore, given the extensive competition in the sector growth is expected to continue in single digits; consolidations within the industry are expected to overcome the saturation point the industry which was reached in the Western Europe and North America markets.

Men’s fragrances continue to be the highest growing product, while the share of women’s fragrances remained virtually constant at around 62% and demand for unisex fragrances decreased.

The brand fragrances segment is growing at a strong pace around the globe, with Eastern Europe recording the strongest increase in sales in brand fragrances. In the key countries of Western Europe and North America, manufacturers held on to their dominant market share.

Role of Merger & Acquisition in corporate strategyA company characterized by opportunistic acquisitions, Procter & Gamble has a tradition to generate product leaders from within and through the purchase of market participants. The Wella acquisition is the largest deal P&G has ever done, but unlike its other sizeable beauty products deal, the Clairol Inc. acquisition, this one puts the company in the position of serving a new customer – Professional hair care business.

P&G acquisition of Wella strengths Procter & Gamble core hair care businesses and permits focusing on higher-growth, higher-margin segments. Wella's professional hair care products business, led by the Wella®, Sebastian®, and Graham Webb® brands, has averaged double-digit sales growth over the last three years - well above the annual industry growth of about 5%. Gaining a strong presence in the professional hair care market, which caters to salons, provides P&G access to industry thought leaders who can help the company better understand hair care needs and market trends.

P&G has had a long history of success in the hair care business with products like Herbal Essences®, Head & Shoulders®, and Pantene®, the top-selling shampoo in the world. With this

2 Wella Annual Report 2002.

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acquisition, P%G becomes the No. 1 retail hair care company in the world and No. 2 in the professional hair care segment, behind French rival L'Oreal SA.

The timing is right for this acquisition as P&G's overall business, and particularly its hair care business, are both strong with solid fundamentals in place. The acquisition of Wella represents a nice addition to P&G portfolio in the hair care business, even though no critical.

The expected synergies between the companies, guarantee that Wella will not be a deterrent to P&G existing growth strategy, to the contrary it could be additive. Post Wella, hair care will represent 16% of P&G’s sales, an increase of around 11% over 2002 numbers.

Furthermore, the role of the merger in the overall P&G strategic plan is directed to assess 3 main variables. First, augment P&G position in styling aids in Western Europe where Wella is number 2 and P&G does not have a presence. Second, it increases P&G’s exposure to color in Europe, Latin America and Asia where Wella has a strong presence but in case of P&G is non existent. Third, but not less important, provides P&G access to the Professional salon business, where Wella has a 22% market share globally.

Recent history leading to the mergerThe following table shows the major events leading to the acquisition of Wella by P&G

Date Description

November 20, 2002 The Financial Times reports that “Wella dismissed recent reports that Henkel, its larger German peer, had submitted a formal takeover offer to Wella's main shareholding family”. The reports came after Wella reported a 54 per cent rise in its 2002 third-quarter operating profits to €73 million, pushing the nine-month figure up 17% to €186 million ($188 million). The offer made by Henkle to Wella's main shareholder, a trust representing the family of Franz Stroher, Wella's founder, offered about €70 - €80 per share, valuing Wella at €5.3 billion. Even though Wella immediately denied it had received any offer, they also considered the price offered too low. On November 20, 2002, Wella's shares were up 3.7 per cent at €54.95.

March 10, 2003 Henkel announces the purchase of a 6.9% stake in Wella. The purchase fulfills the interest of Henkel, of becoming one of the top five cosmetic companies (currently number 10). The purchase also allowed Henkel to receive an attractive gain by any rival bidder and force the Stroher family to run and action for the acquisition of Wella.

March 11, 2003 Wella seem likely to be subject of a bidding war. An imminent bid from Procter & Gamble, the US consumer goods giant, was expected for €5 billion to €6 billion. The bid expected, valued Wella with a 30% premium over current market cap. P&G acquisition of Wella would allow them to catch up with the industry leader L’Oreal. Henkel shares were off 9.5% at € 50.86 on concern that the company could overpay if it were to directly enter into a bidding war with P&G. Wella's vote-holding ordinary shares were up 5% at €76.75.

March 18, 2003 The Procter & Gamble Company signed an agreement to purchase a controlling interest from the majority shareholders of Wella.   The cash purchase of €3.2 billion gives P&G 77.6% of Wella's voting shares. P&G also announced a tender offer for the remaining voting and preference shares, valuing the total shares at € 5.4 billion.    

March 19, 2003 Senior management of Wella voiced unhappiness over their takeover by the US consumer goods group, even after, Procter & Gamble promise to work closely with them. According to Heiner Gurtler3, Wella's chief executive, the transaction was not a necessary step for Wella to continue growing. "But the question of a sale was not in

3 The Financial Times Limited, March 19, 2003. London Edition; COMPANIES & FINANCE EUROPE ; Pg. 26 By Neil Buckley and Uta Harnischfeger

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our hands and it is only fair that the descendants of the founding family decide to sell their stake."Moreover, Henkel1 announced that it would not make a counter offer on Wella and indicated that it had no interest to sell a 6.8 per cent stake in the company.

April 29, 2003 P&G announced4 that it will pay $71.45 per Wella preferred share after disapproval of its original offer. P&G launched a formal offer for the outstanding shares and will raise the total price by about 800 million to €6.6 billion.

May 9, 2003 The executive and supervisory boards of Wella AG, gave a limited to Procter & Gamble's contentious bid for Wella's outstanding shares. Therefore tendering their shares under P&G's offer of €92.25 ($106.04) per ordinary share and €65 per preferred share but refused to recommend that fellow shareholders to do the same.

May 29, 2003 Close Brothers Corporate Financed Limited announced5 that is advising an informal Unofficial Committee of Wella Preference Shareholder that owns approximately 36% of the Wella Preference Shares, but excludes Henkel AG.  The Unofficial Committee reiterates its strong belief that the terms of the Tender Offer being made by P&G for the Wella Preference Shares ("P&G Offer") do not offer adequate consideration to the Wella Preference Shareholders. The Unofficial Committee believed that P&G's offer of only € 65 for the Wella Preference Shares is highly discriminatory to minority shareholders in Germany, when economically the Wella Preference Shares are virtually identical to the Wella Ordinary Shares.  The Committee believes that this view is shared by many other Wella Preference Shareholders, independent research analysts and commentators. Furthermore, P&G's statement that it intends to pursue its plan for Wella regardless of whether substantial numbers of Wella Preference Shareholders remain as investors in Wella after the deal closes, runs the risk of disregarding the legitimate interests of minority shareholders in Wella. 

June 26, 2003 P&G announces the final results from the tender offer for Wella AG shares. The additional acceptance period, required by German law, expired at midnight on Friday, June 20, 2003. 9,053,768 voting and 10,167,531 preference shares of Wella AG (FSE: WAD) were tendered.  This represents 20.51% and 43.49%, respectively, of each class of shares, or a total of 28.47% of the registered share capital.The tendered shares combined with the controlling interest that P&G secured through its share purchase agreement with the majority shareholders will bring P&G's total ownership of Wella AG to 79.17% of the total registered share capital and about 84.9% of the value of the outstanding shares.Now that the acceptance period is closed, only the appropriate regulatory approvals are needed for P&G to acquire the shares and to begin working with Wella management to devise and implement a joint business plan. Consequently, approximately 13.2 million Wella Preference Shares, with a capitalized value of some € 840 million, will remain in the hands of outside investors.

July 9, 2003 Close Brothers Corporate Finance Limited announces that it has written to Mr. A.G. Lafley, Chairman of the Board, President and Chief Executive of P&G, and to Dr. Heiner Guertler, Chairman of the Management Board of Wella, on behalf of a group of Wella Preference Shareholders that collectively owns about 30% of the Wella Preference Shares. In the letter the Minority Shareholders have requested public assurances of6:

1. Wella must continue to be managed as an independent, stand-alone company with strict observation of German corporate laws. In particular, the Wella Management Board must refrain from participating in any

4 Daily Deal, April 29, 2003. M&A. P&G raise its Wella bid. By: Andrew Bulkeley in Berlin5 PR Newswire Association, Inc. May 30, 2003, Statement on Tender Offer for Preference Shares in Wella AG by P&G Germany Management GmbH.6 PR Newswire Association, Inc.  July 9, 2003, Statement on Tender Offer for Preference Shares in Wella AG by P&G Germany Management GmbH.

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action, transaction, or activity that does not serve the best interests of Wella and all of its shareholders

2. The senior management of Wella must remain focused and incentivised to deliver value to the shareholders of Wella.

3. Wella separate management and financial accounting functions.  Under German corporate law, any information made available to P&G as the majority shareholder must also be made available to minority shareholders.

4. The Wella Preference Shares will continue to be listed on the Frankfurt Stock Exchange

5. Wella continues to comply with all of its obligations as a listed company on the Frankfurt Stock Exchange. 

6. Wella will maintain its current dividend policy, in terms that ensure a fair economic share of the value created by Wella is distributed to minority shareholders, and that P&G will support this policy.

7. The appointment of an independent director to the Wella Supervisory Board as one of the six shareholder representatives.

July 30, 2003 The European Union gave regulatory clearance to continue the P&G acquisition of Wella. The EU clearance requires P&G to divest or license, for a period of five years, some hair care products -primarily Herbal Essences®- in Ireland, Norway and Sweden where P&G and Wella have overlap.  No other countries in Europe are affected by the regulatory ruling.Moreover, P&G obtained antitrust clearance in the United States. P&G still has to obtain regulatory rulings in a few markets including Mexico and parts of Eastern Europe.

September 2, 2003 P&G announces the closing of the stock purchase agreement from the majority shareholders of Wella AG. P&G will purchase the additional tendered Wella shares on Sept. 10. With these combined transactions, P&G will own 98.1 percent of Wella voting shares and 79.2 percent of total company shares for a purchase price of 4.65 billion euros.Procter & Gamble also announced Heiner Gurtler, chairman of the management board of Wella AG and managing director of Cosmopolitan Cosmetics, has accepted an offer to serve as a president on Procter & Gamble's Global Leadership Council.  In this role, Gurtler will lead the Clairol and Wella Professional Businesses and Cosmopolitan Cosmetics.  He will remain chairman of the Wella management board.

Sep 19, 2003 Professor Samuel Hayes, Jacob H. Schiff Professor of Investment Banking Emeritus at Harvard Business School, criticized of Procter & Gamble's two-tiered offer to Wella AG shareholders and P&G's subsequent conduct as Wella's majority shareholder. 

February 4, 2004 Minority shareholders of German hair care group Wella AG said they would sue majority owner Procter & Gamble Co. in German court after receiving short shrift at an extraordinary shareholders meeting in Frankfurt.The investors called the extraordinary meeting and hoped to force P&G into a "domination agreement." This would make the consumer goods giant buy their stakes at a price set by an independent auditor.The group said P&G is illegally treating Wella as a division, rather than as a separate company, and pointed to a licensing agreement unveiled last month that has P&G acting as global distributor of Wella's retail brands. The next step is expected to be moving Wella's retail activities to P&G's German headquarters and cutting overlapping staff.But at the start of the rowdy meeting, P&G said a domination agreement is unnecessary and rejected the appointment of an independent auditor, even though the Wella board had supported such a move. The company also said it wouldn't approve a no-confidence vote in Wella chief executive Heiner Gutler, who further angered the investors by taking an executive spot with P&G shortly after it bought Wella.

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Once it has 95% of the company's shares, P&G is allowed by German law to squeeze out all remaining investors and integrate Wella.Several executives have departed from the company, including retail head Axel Dietz and professional products chief Fritz Kuhn. The head of human resources, Alfred KrAmer, is also reportedly thinking of resigning.

April 26, 2004 Wella AG and P&G concluded a domination and profit transfer agreement. The conclusion of the agreement was approved by Wella AG's Supervisory Board.  P&G will gain control of Wella AG as defined under Sections 291 et seq. of the German Stock Corporation Act (Aktiengesetz; "AktG).  Under the agreement, P&G is entitled to give instructions to the Management Board of Wella AG.  Additionally, profits of Wella AG will be transferred to P&G. As required by German law, P&G and Wella jointly filed an application to appoint an independent contract auditor with the German Regional Court in Darmstadt, Germany, on March 1. The court appointed Ernst & Young AG Wirtschaftsprufungsgesellschaft (E&Y).

May 7, 2004 Procter & Gamble and Wella AG today signed a contract to establish P&G as the purchasing agent for Wella. P&G will create a purchasing organization comprised of resources from both companies to purchase raw materials, packaging materials and services for the two companies. As a result of the agreement, parts of the central purchasing activities of the Wella group will be transferred to P&G's global purchasing centers. Nearly all affected Wella employees will be offered positions within Wella or P&G. The contract is effective July 1, 2004.

Standard ratio analysisRatio analysis will allow me to analyze and compare the firms independently from its size; furthermore, it will yield an overall assessment between Wella and P&G in order to determine the sources of value creation based on efficiencies or characteristics that the acquiring company has historically shown.

Growth rates From Table 4 I learn that for Wella sales, COGS and SGA are growing at similar compound rate, therefore Wella is expected to continue to maintain the same profit margins. Moreover, I see that interest expense compound growth had increased to a larger extent compared to other elements of the income statement; the higher growth of interest expense reflects Wella’s use of debt to support its growth and I would assess once I study the leverage ratios for the firm.

Table 4Wella

COMPOUND

GROWTH

Income Statement 1998 1999 2000 2001 2002 RATE

Sales 1.7% 7.7% 19.1% 12.9% 6.4% 11.4%Cost of Goods Sold 0.4% 8.7% 15.0% 12.2% 6.9% 10.7% GROSS MARGIN 2.5% 7.1% 21.3% 13.2% 6.1% 11.8%Selling & Admin. Expense 1.0% 8.8% 20.0% 12.0% 5.1% 11.3%Income Tax Expense 23.1% 10.7% 25.0% 8.9% 9.8% 11.6% OPERATING MARGIN 73.2% 61.6% 106.1% 46.8% 8.2% 51.7%Interest Expense 4.5% 16.9% 32.7% 1.8% 35.6% 21.0% NET INCOME 26.6% 23.1% 25.8% 22.5% 15.7% 21.7%

INTERPERIOD % CHANGES

Procter & Gamble reflect growth rates of a mature, cash flow generator firm. Table 5 shows that the compound sales growth for P&G is only 2% which is lower than Wella but expected given the firm’s size and diverse array of portfolio companies. The most significant measure in the income statement though is COGS, as P&G continues to increase its operating leverage. Given P&G size, is surprising that they continue to find ways to improve COGS and consequently gross profit margins; based in

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recent restructurings in the company which have taken place under the watch of Mr. Jager and Mr. Lafley, and the merger with Wella, P&G is expected to continue to improve its COGS.

Table 5Procter & Gamble

COMPOUND

GROWTH

Income Statement 1998 1999 2000 2001 2002 RATE

Sales 3.9% 2.6% 4.8% -1.8% 2.5% 2.0%Cost of Goods Sold 2.7% 0.7% -0.9% -0.3% -2.3% -0.7% GROSS MARGIN 5.5% 5.2% 11.9% -3.4% 8.1% 5.3%Selling & Admin. Expense 2.8% 6.3% 14.1% -2.8% 1.9% 4.7%Income Tax Expense 6.3% 8.6% -2.4% -12.2% 13.7% 1.3% OPERATING MARGIN 11.4% 1.2% -4.2% -14.3% 38.0% 3.5%Interest Expense 19.9% 18.6% 11.1% 10.0% -24.1% 2.4% NET INCOME 10.7% -0.4% -5.9% -17.5% 48.9% 3.6%

INTERPERIOD % CHANGES

Risk analysisEnterprise risk is measured by liquidity (short term capacity to fund debt) and solvency (long-term ability to fund debt) ratios and indicate the capacity of the firm to support its debt.

From Table 6 and 7 I learned that Wella has higher current and quick ratios than P&G, further analysis of the calculated liquidity ratios indicate that there is a considerable difference of the cash cycle (Net Working Capital Days) for both firms. Table 7 indicates that P&G has had approximately 50 days of cash cycle financing in contrast of Wella’s 110 days. The difference in cash cycle constitutes a tangible opportunity for value creation and I believe this is the main source of the €300 million synergy value on the merger forecasted by P&G.

Table 6Wella

RISK FACTORS:LIQUIDITY: 1998 1999 2000 2001 2002Current Ratio 1.99 1.91 2.14 1.69 1.52Quick Ratio 1.26 1.21 1.09 0.91 0.86Days Receivables Held 81 81 75 72 74Days Inventory Held 136 136 140 151 151Days Payables Held 59 57 57 60 64Net Wk. Capital Days 158 160 158 163 160Operating Cash Flow to Current Liabilities 32.8% 17.5% 28.7% 33.6% 28.7%

SOLVENCY: 1998 1999 2000 2001 2002Total Liabilities / Total Assets 74.6% 72.2% 71.2% 73.6% 74.7%LT Debt / (LT Debt + Share Equity) 45.1% 40.4% 38.9% 45.4% 42.5%LT Debt / Share Equity 82.1% 67.8% 63.7% 83.2% 74.0%Operating Cash Flow to Total Liabilities 13.5% 7.1% 12.0% 14.7% 13.6%Interest Coverage Ratio 4.88 4.86 4.62 5.17 4.40Price Earnings Ratio 15.20 11.40 18.54 19.35 17.83Market to Book Value Ratio 2.3 1.8 3.3 3.9 4.2

Given P&G market power, large array of resources and experience managing businesses; I believe that the simple adaptation of corporate procedures will allow Wella to generate enough synergies in the short-term to guarantee increases of cash flow. Analyzing the elements of the cash cycle I noticed that the differences between the firms are concentrated in day’s inventory and receivables held. Days inventory held would immediately improve by the re-assessment of inventory management which usually requires advance integrated information systems and market power, both of which P&G has in place. Furthermore, as previously stated in the analysis of synergies, P&G expects to leverage the

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integration of its businesses with Wella’s to gain cost savings improving its COGS and ultimately days payable held. Days receivable held are usually driven by the firm’s relationship with the customer and improvement of collection practices. Given P&G’s market power, I expect that Wella will improve receivables by discounts and re-structuring of terms, therefore improving its collection period.

Table 7Procter & Gamble

RISK FACTORS:LIQUIDITY: 1999 2000 2001 2002Current Ratio 1.06 1.00 1.11 0.96Quick Ratio 0.53 0.44 0.55 0.53Days Receivables Held 27 27 27 27Days Inventory Held 57 59 60 61Days Payables Held 37 39 37 38Net Wk. Capital Days 47 47 50 50Operating Cash Flow to Current Liabilities 55.4% 44.7% 58.1% 68.7%

SOLVENCY: 1999 2000 2001 2002Total Liabilities / Total Assets 62.5% 64.2% 65.1% 66.4%LT Debt / (LT Debt + Share Equity) 34.1% 42.3% 44.9% 45.0%LT Debt / Share Equity 51.7% 73.3% 81.5% 81.7%Operating Cash Flow to Total Liabilities 28.6% 22.2% 26.1% 31.3%Interest Coverage Ratio 9.98 8.67 6.81 11.59Price Earnings Ratio 30.91 41.85 56.58 53.39Market to Book Value Ratio 11.3 14.0 16.0 19.2

Solvency ratios indicate that the capital structure of Wella and P&G are similar, with the former having slightly higher leverage. The main difference in the solvency of the firms and its capacity to affront debt long-term, which is given by company’s ability to generate cash. As seen in Table 7, P&G is a money machine firm, it has double the percentage of operating cash flow to total liabilities that Wella does. Furthermore, P&G’s interest coverage ratio is in average 9.2 compared to 4.8 of Wella’s. The difference in capacity to generate cash reduces a firm’s risk, therefore improving credit ratings and decreasing cost of debt. The lower risk structure provided by P&G is another source of synergy generated by the merger, but for the purpose of this paper, the assessment of such saving is assumed to happen in the long run, given that debt outstanding short term will be difficult to refinanced and improvement in credit ratings usually are materialized until additional long-term debt is required.

Price earnings ratio and market to book ratio, also assessed by the solvency ratios, illustrates the assessment of the market on each firm. I noticed in P&G’s case the market provides a considerable premium compared to Wella. This was expected given the higher profit margin, lower risk and strong cash flow provided by P&G. Furthermore, valuations based on the assumptions that Wella did not proceed to merge with P&G and made at the end of 2002 indicate that the market price is consistent with the firm’s value.

Profitability AnalysisProcter & Gamble has considerable higher profit margin than Wella, but in order to perform a detail assessment on both of ROA and ROCE, Figure 1 and 2 shows the composition of each ratio.

As seen in Figure 1 and 2, P&G has higher profit margin for return of assets than Wella. The figure shows the composition of the profit margin by providing the value of each major element of the

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income statement as a percentage of sales. I notice that there is an inverse relationship between the cost of goods sold and selling and administrative expenses between the firms, which can be explained given difference in accounting practices between Germany and the US. By assessing the overall percentage of both measures, P&G presents a lower amount of COGS and SGA. This was expected given P&G’s higher operating leverage and savings the firm has in its sales efforts due to its market power with ad agencies and other service providers, furthermore given that P&G’s brands are leaders in their respective industries (High brand equity) the firm is expected to have to invest smaller amounts of capital in SGA’s.

Figure 1PROFITABILITY ANALYSIS Wella AG

RETURN ON ASSETSLevel 1 2000 2001 2002

6.6% 6.9% 7.5%

Level 2PROFIT MARGIN FOR ROA ASSET TURNOVER2000 2001 2002 2000 2001 20024.7% 4.9% 5.5% 1.4 1.4 1.4

Level 3 2000 2001 2002 2000 2001 2002Sales 100.0% 100.0% 100.0% 4.8 5.1 5.0 Receivable Turnover

Interest Revenues 0.1% 0.0% 0.0% 2.6 2.4 2.4 Inventory Turnover

Other Revenues 2.6% 2.2% 2.8% 6.9 7.1 7.5Cost of Goods Sold 34.1% 33.9% 34.1% 6.9 7.1 7.5 Fixed Asset Turnover

Selling & Administrative Expense 58.5% 58.1% 57.4%Other Expenses - I 1.8% 1.8% 2.2%Other Expenses - II 0.0% 0.0% 0.0%Income Tax Expense 3.7% 3.5% 3.7%Operating Margin 4.7% 4.9% 5.5%

As previously indicated by the liquidity ratios P&G’s current assets turnovers are much higher than Wella’s, but its overall asset turnover are of similar value. This is caused by the low fix asset turn over of P&G’s compared to Wella’s, furthermore, as seen in the appendix (Financial statements), P&G’s has considerable higher percentage on investments and other current assets. This account usually reflects long-term investments and holdings in other companies, which increases the amount of assets of the firm and reduces its asset turnover.

Figure 2PROFITABILITY ANALYSIS FOR: Procter & Gamble

RETURN ON ASSETSLevel 1 2000 2001 2002

12.1% 10.0% 12.6%

Level 2PROFIT MARGIN FOR ROA ASSET TURNOVER2000 2001 2002 2000 2001 2002

10.0% 8.8% 11.8% 1.2 1.1 1.1

Level 3 2000 2001 2002 2000 2001 2002Sales 100.0% 100.0% 100.0% 13.7 13.4 13.4 Receivable Turnover

Interest Revenues 0.8% 1.7% 0.8% 6.2 6.1 6.0 Inventory Turnover

Other Revenues 0.0% 0.0% 0.0% 3.0 2.9 3.0Cost of Goods Sold 52.6% 53.4% 50.9% 3.0 2.9 3.0 Fixed Asset Turnover

Selling & Administrative Expense 30.4% 30.1% 30.0%Other Expenses - I 2.0% 4.4% 2.6%Other Expenses - II 0.0% 0.0% 0.0%Income Tax Expense 5.6% 5.0% 5.6%Operating Margin 10.0% 8.8% 11.8%

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Differences in return on common equity as shown in figure 3 and 4 are due to profit margin differences. Capital structure for both firms is similar with Wella reflecting slightly higher leverage.

Figure 3ROCE PROFITABILITY ANALYSIS FOR: Wella AG

RETURN ON COMMON SHAREHOLDERS' EQUITY2000 2001 2002

18.7% 20.8% 23.3%

PROFIT MARGIN FOR ROCE ASSET TURNOVER CAPITAL STRUCTURE LEVERAGE2000 2001 2002 2000 2001 2002 2000 2001 20023.6% 3.9% 4.2% 1.4 1.4 1.4 3.7 3.8 4.0

The higher return on common equity for P&G can further support the higher market to book value ratio and price earnings premiums, given that P&G provides and average 35% return on common equity, investors will be willing to pay premium to hold a piece of the equity of the firm.

Figure 4ROCE PROFITABILITY ANALYSIS FOR: Procter & Gamble

RETURN ON COMMON SHAREHOLDERS' EQUITY2000 2001 2002

34.0% 28.0% 38.9%

PROFIT MARGIN FOR ROCE ASSET TURNOVER CAPITAL STRUCTURE LEVERAGE2000 2001 2002 2000 2001 2002 2000 2001 20028.9% 7.4% 10.8% 1.2 1.1 1.1 3.2 3.3 3.4

Table 8Wella

PROFITABILITY FACTORS:RETURN ON ASSETS: 1998 1999 2000 2001 2002 Profit Margin for ROA 3.8% 4.3% 4.7% 4.9% 5.5%x Asset Turnover 1.3 1.3 1.4 1.4 1.4= Return on Assets 5.1% 5.6% 6.6% 6.9% 7.5%

RETURN ON COMMON EQUITY: 1998 1999 2000 2001 2002 Profit Margin for ROCE 3.0% 3.4% 3.6% 3.9% 4.2%x Asset Turnover 1.3 1.3 1.4 1.4 1.4x Capital Structure Leverage 3.9 3.9 3.7 3.8 4.0= Return on Common Equity 15.5% 17.3% 18.7% 20.8% 23.3%

Table 9Procter & Gamble

PROFITABILITY FACTORS:RETURN ON ASSETS: 1999 2000 2001 2002 Profit Margin for ROA 11.0% 10.0% 8.8% 11.8%x Asset Turnover 1.2 1.2 1.1 1.1= Return on Assets 13.3% 12.1% 10.0% 12.6%

RETURN ON COMMON EQUITY: 1999 2000 2001 2002 Profit Margin for ROCE 9.9% 8.9% 7.4% 10.8%x Asset Turnover 1.2 1.2 1.1 1.1x Capital Structure Leverage 3.0 3.2 3.3 3.4= Return on Common Equity 36.4% 34.0% 28.0% 38.9%

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Table 10 and 11 present operating performance measures that have been already assessed in previous ratios analysis.

Table 10Wella

OPERATING PERFORMANCE: 1998 1999 2000 2001 2002Gross Margin / Sales 65.0% 64.7% 65.9% 66.1% 65.9%Operating Profit Before Taxes / Revenues 7.0% 7.5% 8.0% 8.2% 8.9%Net Income - Continuous Ops / Revenues 3.0% 3.4% 3.6% 3.9% 4.2%

ASSET TURNOVER:Sales / Avg. Accounts Receivable 4.5 4.5 4.8 5.1 5.0COGS / Average Inventory 2.7 2.7 2.6 2.4 2.4Sales / Average Fixed Assets 6.8 6.5 6.9 7.1 7.5

Table 11P&G

OPERATING PERFORMANCE: 1998 1999 2000 2001 2002Gross Margin / Sales 43.3% 44.4% 47.4% 46.6% 49.1%Operating Profit Before Taxes / Revenues 16.3% 16.4% 14.9% 12.1% 16.6%Net Income - Continuous Ops / Revenues 10.1% 9.8% 8.8% 7.3% 10.7%

ASSET TURNOVER:Sales / Avg. Accounts Receivable 26.7 13.3 13.7 13.4 13.4COGS / Average Inventory 12.8 6.4 6.2 6.1 6.0Sales / Average Fixed Assets 6.1 3.1 3.0 2.9 3.0

Analysis of the value paid and the modes of payment

Description of the deal and analysis of valuation

Transaction structure P&G is paying €5.4 billion plus the assumption of €1.1 billion in debt for a total enterprise value of €6.5 billion. As a first step in the merger, P&G has agreed to purchase the Stroeher family ownership of the company for €3.2 billion, which represent 77.6% of the voting shares. With the remaining part of the shares being purchased by a public tender. The common share have a tender price of €92.25 per share which represents a 58% premium over the average stock price over the last 6 months and a 59.7% premium over the €57.75 per share value at the annual report ending year price. The public tender price for the preference shares is €61.5 per share, representing a 15% premium.

In order to understand the premium paid for common shares by P&G, I determined the value of Wella as it was at the end of 2002, the valuation was made on the basis that Wella will continue to run its businesses based on the same strategic plan historically shown by the last five years of financial information and the firm capital structure was sustained in the short run. The growth assumptions for each account of the firm’s financial statements necessary for the valuation are presented in the appendix (Wella AG Forecast).

To determine the value of Wella as of December 2002, the weighted average cost of capital needs to be determined, to do so I first had to calculate the firm’s cost of equity capital and cost of debt capital. Cost of equity capital was determined using the CAPM, based on the assumption that Wella’s beta was highly correlated to the German stock market. Given that the company is the second largest in its

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sector, has a 124 year history and is a flagship stock firm of the German stock exchange with presence in all major stock indexes the assumption is strongly supported. Risk free rates and market premiums are values for the German market (where Wella collects its equity capital). Market value for the firm is determined as of December 31st, 2002 based on a final stock price of 57.75. Cost of debt is determined by the weighted average of debt financing interest rates effective in 2002, the information was gather form Wella’s annual report.

VALUATION ASSUMPTIONS

COST OF EQUITY CAPITAL: COST OF DEBT CAPITALEquity risk (i.e. beta) 0.97 Debt capital 465,615$

Risk free rates 3.6% Average cost of debt capital, before tax 13.5%

Market risk premium 8.2% Effective tax rate 40%

Required rate of return on common equity: 11.55%COST OF PREFERRED STOCKPreferred Stock Capital 23,381$

Dividends -$

Implied Yield 0.0%

Current share price 57.75$ WEIGHTED AVERAGE COST OF CAPITALNumber of shares outstanding (millions) 44,135.7 Weight of equity in capital structure 0.84Current market value (millions) 2,548,836$ Weight of debt in capital structure 0.15Implied value of equity (millions) 2,664,462$ Weight of preferred in capital structure 0.01Long-run growth assumption 5.0% Weighted average cost of capital 10.96%

Given the assumptions and using the DCF valuation method I have the following results:

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG

ContinuingFREE CASH FLOWS FOR ALL DEBT 1 2 3 4 5 6 7 8 9 10 ValueAND EQUITY STAKEHOLDERS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Net Cash Flow from Operations 127,078 137,059 165,580 202,571 258,950 300,254 324,206 335,532 350,896 366,877 396,374 Add back: Interest Expense after tax 33,850 37,404 48,405 53,246 58,571 55,349 58,117 61,022 64,074 67,277 70,641 +/- Change in Operating Cash (1,663) (1,713) (2,941) (4,941) (5,337) (5,764) (3,890) (4,085) (4,289) (4,504) (4,729) Free Cash Flow from Operations 159,264 172,750 211,044 250,876 312,184 349,840 378,432 392,470 410,680 429,651 462,287 Net Cash Flow from Investing (94,464) (101,481) (109,511) (117,866) (126,970) (111,979) (117,523) (123,342) (129,450) (135,862) (144,599) Free Cash Flow - All Debt and Equity 64,800 71,268 101,532 133,010 185,214 237,861 260,909 269,128 281,230 293,789 317,687

Present Value Factors 0.90 0.81 0.73 0.66 0.59 0.54 0.48 0.44 0.39 0.35 PV Free Cash Flows 58,400 57,887 74,323 87,750 110,122 127,457 126,000 117,133 110,312 103,857 Sum of PV Free Cash Flows 973,239 PV of Continuing Value 1,884,841 Total PV Free Cash Flows 2,858,081 Less: Outstanding Debt (FV or BV) (465,615) Less: Preferred Stock (FV or BV) (23,381) PV of Equity 2,369,085 Adjust to midyear discounting 1.055 Total PV of Equity 2,498,891 Shares Outstanding 44,136 Estimated Value per Share 56.62$

Current share price 57.75$ Percent difference -2%(Value/price)-1: positive number indicates underpricing.

To further confirm the valuation I used 4 other different methods to calculate the firm’s estimated value per share, the methods used are: expected equity cash flow, the residual income, the market-to-book residual income and the dividend based valuation. The results for the expected equity cash flow are presented as follows, with the rest presented in the appendix (Wella Valuations):

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG

ContinuingFREE CASH FLOWS FOR COMMON 1 2 3 4 5 6 7 8 9 10 ValueEQUITY SHAREHOLDERS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

Free Cash Flow - All Debt and Equity 64,800 71,268 101,532 133,010 185,214 237,861 260,909 269,128 281,230 293,789 317,687 Net CFs from Debt Financing 18,435 23,736 41,998 47,168 52,833 37,520 39,227 41,018 42,896 44,866 63,969 Subtract: Interest Expense after tax (33,850) (37,404) (48,405) (53,246) (58,571) (55,349) (58,117) (61,022) (64,074) (67,277) (70,641) Free Cash Flow for Common Equity 49,385 57,601 95,125 126,932 179,476 220,032 242,019 249,123 260,052 271,378 312,184

Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Free Cash Flows 44,270 46,287 68,523 81,965 103,892 114,176 112,578 103,880 97,206 90,933 Sum of PV Free Cash Flows 863,710 PV of Continuing Value 1,596,074 Total 2,459,784 Adjust to midyear discounting 1.06 Total PV Free Cash Flows to Equity 2,601,886 Shares Outstanding 44,136 Estimated Value per Share 58.95$

Current share price 57.75$ Percent difference 2%(Value/price)-1: positive number indicates underpricing.

In order to support the price paid by Procter & Gamble, I again valued Wella based on the assumptions that the firm will continue to operate its business under normal market conditions and P&G would generate synergies valued in €300 million by the third year. P&G assumptions of €3.6 million of additional revenue are already assessed in Wella’s current valuation estimates.

Valuation assumptions would change with new synergies since they are expected to beneficially affect asset turnover, therefore increasing the market implied value of equity and altering the WACC of the firm.

VALUATION ASSUMPTIONS

COST OF EQUITY CAPITAL: COST OF DEBT CAPITALEquity risk (i.e. beta) 0.97 Debt capital 465,615$

Risk free rates 3.6% Average cost of debt capital, before tax 13.5%

Market risk premium 8.2% Effective tax rate 40%

Required rate of return on common equity: 11.55%COST OF PREFERRED STOCKPreferred Stock Capital 23,381$

Dividends -$

Implied Yield 0.0%

Current share price 57.75$ WEIGHTED AVERAGE COST OF CAPITALNumber of shares outstanding (millions) 44,135.7 Weight of equity in capital structure 0.86Current market value (millions) 2,548,836$ Weight of debt in capital structure 0.13Implied value of equity (millions) 3,131,896$ Weight of preferred in capital structure 0.01Long-run growth assumption 5.0% Weighted average cost of capital 11.04%

As previously stated and supported by the ratio analysis, synergies generated by P&G will be the result of improvements in management of cash cycle and the consequently enhances of assets turnover. The complete forecast of the synergies can be found in the appendix (Wella AG forecast based on €300 M synergy estimates by P&G) and can be compared with the previous forecast made assuming that Wella continues business as usual. By comparing the two forecasts is clear that the €300M generated in cash by the firm is caused by improvements in percentage of COGS, decreases in inventory due to better practices and increase in cash due to improvements in collection.

Again I used 5 methods to determine the value of the firm, three are included in the appendix and I show the Free cash flow valuations and the expected equity cash flow:

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG based on €300M synergy estimated by P&G in the first 3 years

ContinuingFREE CASH FLOWS FOR ALL DEBT 1 2 3 4 5 6 7 8 9 10 ValueAND EQUITY STAKEHOLDERS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Net Cash Flow from Operations 219,046 232,619 283,854 296,754 341,802 325,522 331,874 343,475 359,124 375,401 411,595 Add back: Interest Expense after tax 33,850 37,404 48,405 53,246 58,571 55,349 58,117 61,022 64,074 67,277 70,641 +/- Change in Operating Cash (5,545) (6,099) (6,709) (5,166) (5,528) (5,915) (4,521) (4,747) (4,984) (5,233) (5,495) Free Cash Flow from Operations 247,351 263,924 325,550 344,834 394,845 374,956 385,470 399,751 418,213 437,446 476,741 Net Cash Flow from Investing (94,464) (101,481) (109,511) (117,866) (126,970) (111,979) (117,523) (123,342) (129,450) (135,862) (144,599) Free Cash Flow - All Debt and Equity 152,886 162,442 216,039 226,968 267,875 262,977 267,947 276,409 288,763 301,584 332,142

Present Value Factors 0.90 0.81 0.73 0.66 0.59 0.53 0.48 0.43 0.39 0.35 PV Free Cash Flows 137,692 131,758 157,815 149,321 158,719 140,331 128,772 119,637 112,563 105,876 Sum of PV Free Cash Flows 1,342,485 PV of Continuing Value 1,932,059 Total PV Free Cash Flows 3,274,544 Less: Outstanding Debt (FV or BV) (465,615) Less: Preferred Stock (FV or BV) (23,381) PV of Equity 2,785,548 Adjust to midyear discounting 1.055 Total PV of Equity 2,939,244 Shares Outstanding 44,136 Estimated Value per Share 66.60$

Current share price 57.75$ Percent difference 15%(Value/price)-1: positive number indicates underpricing.

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG based on €300M synergy estimated by P&G in the first 3 years

ContinuingFREE CASH FLOWS FOR COMMON 1 2 3 4 5 6 7 8 9 10 ValueEQUITY SHAREHOLDERS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

Free Cash Flow - All Debt and Equity 152,886 162,442 216,039 226,968 267,875 262,977 267,947 276,409 288,763 301,584 332,142 Net CFs from Debt Financing 18,435 23,736 41,998 47,168 52,833 37,520 39,227 41,018 42,896 44,866 63,969 Subtract: Interest Expense after tax (33,850) (37,404) (48,405) (53,246) (58,571) (55,349) (58,117) (61,022) (64,074) (67,277) (70,641) Free Cash Flow for Common Equity 137,472 148,775 209,631 220,890 262,137 245,148 249,057 256,404 267,585 279,173 326,638

Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Free Cash Flows 123,233 119,552 151,008 142,638 151,741 127,209 115,852 106,916 100,022 93,545 Sum of PV Free Cash Flows 1,231,717 PV of Continuing Value 1,669,973 Total 2,901,690 Adjust to midyear discounting 1.06 Total PV Free Cash Flows to Equity 3,069,320 Shares Outstanding 44,136 Estimated Value per Share 69.54$

Current share price 57.75$ Percent difference 20%(Value/price)-1: positive number indicates underpricing.

From the results I obtained, I first notice that the value of Wella reflected by its stock price is consistent with the value of the firm using traditional valuation methods and assuming the firm continues business as usual. The difference on value from the results obtained and market price vary by less than 5%. Dividends based valuation gives a higher value to the firm at €60.37 per share compared to the €57.75 per share market value.

When I make the valuation assuming a €300 million of additional cash flow generated by the firm due to synergies, I obtain that the Wella should had been valued with a 15% to 23% premium, which represent a much lower price that the 59.7% offered by P&G.

The value obtained for Wella given the €300 million in synergies is consistent with the offer made initially by Henkel and consequently rejected by Wella’s owners. I suspect that P&G was motivated to provide a higher premium to appeal Wella’s owners and allow them to take control of the firm quickly. A bid war with Henkel would have drain additional value from P&G and extended the required time to start generating returns from the firm. Furthermore, additional value creation opportunities could have

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been identified or different assumptions could also be made therefore supporting the additional premium paid.

When the analysis of price paid is made using the EV/EBITDA multiple, I found that the 15x multiple paid, is toward the higher end of deals in this industry, but given recent history and success P&G had in materializing synergies on the 2001 acquisition of Clairol, I consider them logical.

Based on a total enterprise value of €6.5 billion, P&G is paying 1.9x sales, 21x EBIT and 15x EBITDA for Wella. As a reference, P&G paid 3.1x sales, 16.5x EBIT and 14.9x EBITDA when it had acquired Clairol in 2001

Mode of PaymentP&G will be financing the acquisition with a combination of debt and cash and was not subject to any change form rating agencies, since at the time of the merger was about to get upgraded. It should be expected for the company to slow down its discretionary share repurchases over the next months.

P&G decision to finance the acquisition largely with cash is consistent with the firm’s acquisition history; moreover it will permit the firm accelerate the acquisition process by improving the attractiveness of the offer. Based on recent stock repurchase program, P&G’s is not interested in diluting outstanding current stock price, maintaining P/E ratio, therefore making financing the acquisition with cash is the most attractive mean of payment.

Cash payment also provides the means to allocate excess cash in high margin-high growth opportunities and reinforces the portfolio approach of the firm. I’ll expect Wella to became another flagship brand for P&G and improve return of the firm.

Post merger performance

Summary and Conclusion2003 results for Wella indicate that after reasonable good delivery until the 3Q03, sales progressively deteriorated which combined with increasing restructuring costs in its Consumer division, in connection with the transfer of sales activities to its new owner Procter & Gamble Co, caused the firm to fail its estimates and generated an EBIT loss.

Wella posted an EBIT loss of €195.2 million in its full-year, while sales increased 5% to €1.55 billion The company’s largest division Professional, posted a EBIT profit, while the Cosmetics & Fragrances division posted an EBIT loss.

Even with positive EBIT profit, the professional hair care fail to meet expectations in contrast with L’Oreal which improved by of 8.6% its estimates, probably pointing toward market share losses. Equally the deterioration in the consumer segment was surprising. The Consumer division posted an EBIT loss of €195.2 million on restructuring costs and other extraordinary items – job cuts, site closures – following the phased transfer of sales activities to P&G.

Given the results obtained by P&G after taking control of Wella is clear that a complete assessment of the merger will be only possible until more time has passed by. Recent events indicate that P&G have started an integral restructuring effort. Synergy was not created in the first year of operations and is still unclear what the results are for second year. Management has departed from Wella and questions still exist on the firm’s projections based on recent historic losses. By all means I consider P&G, overpaid for the acquisition but still is capable of realizing synergies that will support the premium paid.

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

Appendix7

Financial Statements

Balance Sheet 1997 1998 1999 2000 2001 2002Cash 49,375 68,578 53,896 35,423 58,608 55,449

Marketable Securities 97,098 91,623 73,752 33,751 27,668 18,379

Accounts Receivable - Trade 487,930 485,699 566,349 601,288 653,334 712,650

Inventories 275,653 297,213 327,236 410,886 485,029 471,273

Other Current Assets 108,725 76,659 73,721 242,593 143,148 128,753

CURRENT ASSETS 1,018,781 1,019,772 1,094,954 1,323,941 1,367,787 1,386,504

Investments in Securities 51,191 64,294 68,290 83,197 73,090 77,378

Property, Plant & Equipment - at cost 678,596 741,924 848,426 937,480 1,039,160 1,050,111

less: Accumulated Depreciation 377,824 393,830 465,749 507,053 575,664 605,851

Other Non-Current Assets 171,955 318,451 361,029 218,899 530,676 577,670

TOTAL ASSETS 1,542,699 1,750,611 1,906,950 2,056,464 2,435,049 2,485,812 Accounts Payable - Trade 124,675 129,736 139,079 186,948 195,823 206,592

Notes Payable - Non Trade 11,760 9,505 11,372 17,173 12,395 13,819

Current Portion of Long Term Debt 154,102 174,336 239,193 208,893 336,426 410,249

Other Current Liabilities 190,420 200,130 182,705 204,642 267,064 282,267

CURRENT LIABILITIES 480,957 513,707 572,349 617,656 811,708 912,927

Long Term Debt 350,163 365,773 359,360 377,414 534,304 465,615

Deferred Taxes 76,120 80,972 86,188 90,266 94,122 108,148

Other Non-Current Liabilities 197,205 344,806 359,181 378,260 352,588 370,103

TOTAL LIABILITIES 1,104,445 1,305,258 1,377,078 1,463,596 1,792,722 1,856,793 Preferred Stock 22,990 22,990 23,381 23,381 23,381 23,381

Common Stock 43,397 43,397 44,136 44,136 44,136 44,136

Additional Paid-in Capital 89,694 89,694 89,694 89,694 91,084 89,694

Retained Earnings 262,557 295,374 351,279 426,223 511,677 613,739

Accumulated Other Comprehensive Income 21,056 24,207

Other Equity Adjustments 19,616 (6,102) 21,382 24,228 2,403 (90,200)

less: Treasury Stock 14,794 51,410 75,938

SHAREHOLDER'S EQUITY 438,254 445,353 529,872 592,868 642,327 629,019 TOTAL EQUITIES 1,542,699 1,750,611 1,906,950 2,056,464 2,435,049 2,485,812

Wella AGKey Financial Information

Income Statement 1997 1998 1999 2000 2001 2002Sales 2,165,055 2,202,911 2,371,549 2,824,106 3,187,100 3,390,416

Interest Revenues 1,123 1,322 2,901 2,764 316 100

Other Revenues & Gains 60,350 67,610 75,405 74,154 70,654 94,165

Cost of Goods Sold 767,245 770,583 837,591 963,329 1,080,572 1,155,407

Selling & Admin. Expense 1,253,413 1,265,883 1,377,270 1,652,884 1,851,011 1,945,684

Other Expenses & Losses - I 74,654 75,554 48,770 49,651 58,830 74,469

Interest Expense 31,375 32,778 38,328 50,849 51,780 70,188

Income Tax Expense 48,400 61,925 67,735 83,455 92,281 95,965

NET INCOME 51,441 65,120 80,161 100,856 123,596 142,968

7 Figures in ‘000

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December 13th, 2003

Statement of Cash Flow 1998 1999 2000 2001 2002

NET INCOME, CONTINUING OPS 65,120 80,161 100,856 123,596 142,968 Depreciation and Amortization 80,500 87,000 102,700 116,000 131,900

Other Addbacks 89,380 99,839 127,444 149,404 177,332

Other Subtractions (53,000) (73,000) (44,000) (94,000) (104,900)

WORKING CAPITAL FROM OPS 182,000 194,000 287,000 295,000 347,300 (Incr.) Decrease in Receivables - Trade (6,000) (48,000) (35,000) (30,000) (109,600)

(Incr.) Decrease in Inventories (15,000) (17,000) (77,000) (35,000) 2,600

(Incr.) Decr. in Other Curr. Assets 14,000 (4,000) (72,000) 5,000 2,300

Incr. (Decr.) in Acct. Payable - Trade (12,000) (30,000) 68,000 5,000 4,700

NET CF FROM OPERATIONS 163,000 95,000 171,000 240,000 247,300 Fixed Assets Sold 26,000 21,000 11,000 7,000 38,800

less: Fixed Assets Acquired 118,000 108,000 130,000 385,000 187,300

less: Investments Acquired 44,000 30,000 26,000 5,000 9,400

Other Investment Transactions 44,000 47,000 43,000 62,000 48,300

NET CF FROM INVESTING (92,000) (70,000) (102,000) (321,000) (109,600) Increase in LT Borrowing 20,000 40,000 261,000 6,600

Issue of Capital Stock 1,000

less: Decrease in LT Borrowing 19,000

less: Acquisition of Capital Stock 15,000 37,000 24,500

Dividends 19,000 21,000 26,000 34,000 37,000

Other Financing Transactions (60,000) (58,000) (68,000) (93,000) 92,500

NET CF FROM FINANCING (59,000) (38,000) (128,000) 97,000 37,600

NET CHANGE IN CASH 12,000 (13,000) (59,000) 16,000 175,300

Share and Tax Information 1997 1998 1999 2000 2001 2002

Common Shares Outstanding 44,136 44,136 44,136 44,001 44,136 44,136 Market Price per Share end period 21.86 22.42 20.70 42.50 54.20 57.75 Tax Rate 40% 40% 40% 40% 40% 40%

INCOME STATEMENT ITEMS AS % OF SALES:A #DIV/0! message indicates that a ratio denominator is zero.1998 1999 2000 2001 2002Sales 100.0% 100.0% 100.0% 100.0% 100.0%Cost of Goods Sold 35.0% 35.3% 34.1% 33.9% 34.1% GROSS MARGIN 65.0% 64.7% 65.9% 66.1% 65.9%Interest Revenues 0.060% 0.122% 0.098% 0.010% 0.003%Other Revenues & Gains 3.1% 3.2% 2.6% 2.2% 2.8%Selling & Admin. Expense 57.5% 58.1% 58.5% 58.1% 57.4%Other Expenses & Losses - I 3.4% 2.1% 1.8% 1.8% 2.2%Income Tax Expense 3.4% 3.5% 3.7% 3.5% 3.7% OPERATING MARGIN 3.8% 4.3% 4.7% 4.9% 5.5%Interest Expense 1.5% 1.6% 1.8% 1.6% 2.1%Income Tax Savings on Interest 0.6% 0.6% 0.7% 0.6% 0.8% NET INCOME 3.0% 3.4% 3.6% 3.9% 4.2%

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BALANCE SHEET COMMON SIZE STATEMENT:A #DIV/0! message indicates that a ratio denominator is zero.ASSETS: 1998 1999 2000 2001 2002Cash and Marketable. Securities 9.2% 6.7% 3.4% 3.5% 3.0%Accounts Receivable - Trade 27.7% 29.7% 29.2% 26.8% 28.7%Inventories 17.0% 17.2% 20.0% 19.9% 19.0%Other Current Assets 4.4% 3.9% 11.8% 5.9% 5.2%

CURRENT ASSETS 58.3% 57.4% 64.4% 56.2% 55.8%

Investments in Securities 3.7% 3.6% 4.0% 3.0% 3.1%Property, Plant & Equipment - at cost 42.4% 44.5% 45.6% 42.7% 42.2%less: Accumulated Depreciation 22.5% 24.4% 24.7% 23.6% 24.4%Other Assets 18.2% 18.9% 10.6% 21.8% 23.2%

TOTAL ASSETS 100.0% 100.0% 100.0% 100.0% 100.0%

LIABILITIES: 1998 1999 2000 2001 2002Accounts Payable - Trade 7.4% 7.3% 9.1% 8.0% 8.3%Notes Payable - Non Trade 0.5% 0.6% 0.8% 0.5% 0.6%Current Portion of Long Term Debt 10.0% 12.5% 10.2% 13.8% 16.5%Other Current Liabilities 11.4% 9.6% 10.0% 11.0% 11.4%

CURRENT LIABILITIES 29.3% 30.0% 30.0% 33.3% 36.7%

Long Term Debt 20.9% 18.8% 18.4% 21.9% 18.7%Deferred Tax 4.6% 4.5% 4.4% 3.9% 4.4%Other Non-Current Liabilities 19.7% 18.8% 18.4% 14.5% 14.9%

NON-CURRENT LIABILITIES 45.2% 42.2% 41.1% 40.3% 38.0% TOTAL LIABILITIES 74.6% 72.2% 71.2% 73.6% 74.7%

STOCKHOLDERS' EQUITYPreferred Stock 1.3% 1.2% 1.1% 1.0% 0.9%Common Stock 2.5% 2.3% 2.1% 1.8% 1.8%Additional Paid-in Capital 5.1% 4.7% 4.4% 3.7% 3.6%Retained Earnings 16.9% 18.4% 20.7% 21.0% 24.7%Other Equity Adjustments -0.3% 1.1% 1.2% 0.1% -3.6%

SHAREHOLDERS' EQUITY 25.4% 27.8% 28.8% 26.4% 25.3%

TOTAL EQUITIES 100.0% 100.0% 100.0% 100.0% 100.0%

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BALANCE SHEET - INTERPERIOD % CHANGES:A #DIV/0! message indicates that a ratio denominator is zero. COMPOUND

1998 1999 2000 2001 2002 GROWTH

ASSETS: INTERPERIOD % CHANGES RATE

Cash and Mkt. Securities 9.4% -20.3% -45.8% 24.7% -14.4% -12.8%Accounts Receivable - Trade -0.5% 16.6% 6.2% 8.7% 9.1% 7.9%Inventories 7.8% 10.1% 25.6% 18.0% -2.8% 11.3%Other Current Assets -29.5% -3.8% 229.1% -41.0% -10.1% 3.4% CURRENT ASSETS 0.1% 7.4% 20.9% 3.3% 1.4% 6.4%

Investments in Securities 25.6% 6.2% 21.8% -12.1% 5.9% 8.6%Property, Plant & Equipment - at cost 9.3% 14.4% 10.5% 10.8% 1.1% 9.1%less: Accumulated Depreciation 4.2% 18.3% 8.9% 13.5% 5.2% 9.9%Other Non-Current Assets 85.2% 13.4% -39.4% 142.4% 8.9% 27.4% TOTAL ASSETS 13.5% 8.9% 7.8% 18.4% 2.1% 10.0%

LIABILITIES:Accounts Payable - Trade 4.1% 7.2% 34.4% 4.7% 5.5% 10.6%Notes Payable - Non-Trade -19.2% 19.6% 51.0% -27.8% 11.5% 3.3%Current Portion of Long Term Debt 13.1% 37.2% -12.7% 61.1% 21.9% 21.6%Other Current Liabilities 5.1% -8.7% 12.0% 30.5% 5.7% 8.2% CURRENT LIABILITIES 6.8% 11.4% 7.9% 31.4% 12.5% 13.7%Long Term Debt 4.5% -1.8% 5.0% 41.6% -12.9% 5.9%Deferred Tax 6.4% 6.4% 4.7% 4.3% 14.9% 7.3%Other Non-Current Liabilities 74.8% 4.2% 5.3% -6.8% 5.0% 13.4% NON-CURRENT LIABILITIES 27.0% 1.7% 5.1% 16.0% -3.8% 8.6% TOTAL LIABILITIES 18.2% 5.5% 6.3% 22.5% 3.6% 10.9%

STOCKHOLDERS' EQUITYPreferred Stock 0.0% 1.7% 0.0% 0.0% 0.0% 0.3%Common Stock 0.0% 1.7% 0.0% 0.0% 0.0% 0.3%Additional Paid-in Capital 0.0% 0.0% 0.0% 1.5% -1.5% 0.0%Retained Earnings 12.5% 18.9% 21.3% 20.0% 19.9% 18.5% SHAREHOLDERS' EQUITY 1.6% 19.0% 11.9% 8.3% -2.1% 7.5% TOTAL EQUITIES 13.5% 8.9% 7.8% 18.4% 2.1% 10.0%

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Balance Sheet 1998 1999 2000 2001 2002Cash 1,549,000 2,294,000 1,415,000 2,306,000 3,427,000

Marketable Securities 857,000 506,000 185,000 212,000 196,000

Accounts Receivable - Trade 2,781,000 2,940,000 2,910,000 2,931,000 3,090,000

Inventories 3,284,000 3,338,000 3,490,000 3,384,000 3,456,000

Other Current Assets 2,106,000 2,280,000 2,146,000 2,056,000 1,997,000

CURRENT ASSETS 10,577,000 11,358,000 10,146,000 10,889,000 12,166,000

Investments in Securities 1,198,000 1,307,000 1,742,000 2,103,000 1,831,000

Property, Plant & Equipment - at cost 20,152,000 21,400,000 23,221,000 22,821,000 23,070,000

less: Accumulated Depreciation 7,972,000 8,774,000 9,529,000 9,726,000 9,721,000

Other Non-Current Assets 7,011,000 6,822,000 8,786,000 8,300,000 13,430,000

TOTAL ASSETS 30,966,000 32,113,000 34,366,000 34,387,000 40,776,000 Accounts Payable - Trade 2,051,000 2,300,000 2,209,000 2,075,000 2,205,000

Notes Payable - Non Trade 2,281,000 3,150,000 3,241,000 2,233,000 3,731,000

Other Current Liabilities 4,918,000 5,311,000 4,691,000 5,538,000 6,768,000

CURRENT LIABILITIES 9,250,000 10,761,000 10,141,000 9,846,000 12,704,000

Long Term Debt 5,765,000 6,231,000 9,012,000 9,792,000 11,201,000

Deferred Taxes 428,000 362,000 625,000 894,000 1,077,000

Other Non-Current Liabilities 3,287,000 2,701,000 2,301,000 1,845,000 2,088,000

TOTAL LIABILITIES 18,730,000 20,055,000 22,079,000 22,377,000 27,070,000 Preferred Stock 1,821,000 1,781,000 1,737,000 1,701,000 1,634,000

Common Stock 1,337,000 1,320,000 1,306,000 1,296,000 1,301,000

Additional Paid-in Capital 907,000 1,337,000 1,794,000 2,057,000 2,490,000

Retained Earnings 11,144,000 10,778,000 10,710,000 10,451,000 11,980,000

Accumulated Other Comprehensive Income (1,357,000) (1,606,000) (1,842,000) (2,120,000) (2,360,000)

Other Equity Adjustments (1,616,000) (1,552,000) (1,418,000) (1,375,000) (1,339,000)

SHAREHOLDER'S EQUITY 12,236,000 12,058,000 12,287,000 12,010,000 13,706,000 TOTAL EQUITIES 30,966,000 32,113,000 34,366,000 34,387,000 40,776,000

Key Financial Information Procter & Gamble

Income Statement 1998 1999 2000 2001 2002Sales 37,154,000 38,125,000 39,951,000 39,244,000 40,238,000

Interest Revenues 201,000 235,000 304,000 674,000 308,000

Cost of Goods Sold 21,064,000 21,206,000 21,018,000 20,962,000 20,481,000

Selling & Admin. Expense 10,035,000 10,666,000 12,165,000 11,823,000 12,052,000

Other Expenses & Losses 814,000 1,723,000 1,027,000

Interest Expense 548,000 650,000 722,000 794,000 603,000

Income Tax Expense 1,928,000 2,075,000 1,994,000 1,694,000 2,031,000

NET INCOME 3,780,000 3,763,000 3,542,000 2,922,000 4,352,000

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Statement of Cash Flow 1998 1999 2000 2001 2002

NET INCOME, CONTINUING OPS 3,780,000 3,763,000 3,542,000 2,922,000 4,352,000 Depreciation and Amortization 1,598,000 2,148,000 2,191,000 2,271,000 1,693,000

Other Addbacks 463,000 389,000

Other Subtractions (101,000) (60,000) (102,000)

WORKING CAPITAL FROM OPS 5,277,000 5,851,000 6,196,000 5,091,000 6,434,000 (Incr.) Decrease in Receivables - Trade 42,000 (207,000) 64,000 (122,000) 96,000

(Incr.) Decrease in Inventories (229,000) (96,000) (176,000) (67,000) 159,000

(Incr.) Decr. in Other Curr. Assets (65,000) (926,000) (404,000) 57,000 (98,000)

Incr. (Decr.) in Acct. Payable - Trade (3,000) 792,000 (883,000) 801,000 684,000

Incr. (Decr.) in Other Curr. Liabilities (137,000) 130,000 (122,000) 44,000 467,000

NET CF FROM CONTINUING OPS 4,885,000 5,544,000 4,675,000 5,804,000 7,742,000 Fixed Assets Sold 555,000 434,000 419,000 788,000 227,000

Investments Sold

less: Fixed Assets Acquired 2,559,000 2,828,000 3,018,000 2,486,000 1,679,000

less: Investments Acquired 3,269,000 137,000 2,967,000 138,000 5,471,000

Other Investment Transactions 63,000 356,000 221,000 (7,000) 88,000

NET CF FROM INVESTING (5,210,000) (2,175,000) (5,345,000) (1,843,000) (6,835,000) Increase in ST Borrowing 1,315,000 689,000 243,000 (1,092,000) 1,394,000

Increase in LT Borrowing 1,970,000 986,000 4,196,000 1,356,000 1,690,000

less: Decrease in LT Borrowing 432,000 334,000 1,409,000 226,000 461,000

less: Acquisition of Capital Stock 1,929,000 2,533,000 1,766,000 1,250,000 568,000

Dividends 1,462,000 1,626,000 1,796,000 1,943,000 2,095,000

Other Financing Transactions 158,000 212,000 336,000 141,000 237,000

NET CF FROM FINANCING (380,000) (2,606,000) (196,000) (3,014,000) 197,000

NET CHANGE IN CASH (705,000) 763,000 (866,000) 947,000 1,104,000

Share and Tax Information 1998 1999 2000 2001 2002

Common Shares Outstanding 1,337,461 1,319,754 2,611,740 2,591,480 2,602,000 Market Price per Share 91.06 88.12 56.75 63.80 89.30 Tax Rate 35% 35% 35% 35% 35%

INCOME STATEMENT ITEMS AS % OF SALES:A #DIV/0! message indicates that a ratio denominator is zero.1998 1999 2000 2001 2002Sales 100.0% 100.0% 100.0% 100.0% 100.0%Cost of Goods Sold 56.7% 55.6% 52.6% 53.4% 50.9% GROSS MARGIN 43.3% 44.4% 47.4% 46.6% 49.1%

Interest Revenues 0.5% 0.6% 0.8% 1.7% 0.8%Selling & Admin. Expense 27.0% 28.0% 30.4% 30.1% 30.0%Other Expenses & Losses - I 0.0% 0.0% 2.0% 4.4% 2.6%Income Tax Expense 5.7% 6.0% 5.6% 5.0% 5.6% OPERATING MARGIN 11.1% 11.0% 10.0% 8.8% 11.8%

Interest Expense 1.5% 1.7% 1.8% 2.0% 1.5%Income Tax Savings on Interest 0.5% 0.6% 0.6% 0.7% 0.5% NET INCOME 10.2% 9.9% 8.9% 7.4% 10.8%

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BALANCE SHEET COMMON SIZE STATEMENT:A #DIV/0! message indicates that a ratio denominator is zero.ASSETS: 1998 1999 2000 2001 2002Cash and Marketable. Securities 7.8% 8.7% 4.7% 7.3% 8.9%Accounts Receivable - Trade 9.0% 9.2% 8.5% 8.5% 7.6%Inventories 10.6% 10.4% 10.2% 9.8% 8.5%Other Current Assets 6.8% 7.1% 6.2% 6.0% 4.9% CURRENT ASSETS 34.2% 35.4% 29.5% 31.7% 29.8%Investments in Securities 3.9% 4.1% 5.1% 6.1% 4.5%Property, Plant & Equipment - at cost 65.1% 66.6% 67.6% 66.4% 56.6%less: Accumulated Depreciation 25.7% 27.3% 27.7% 28.3% 23.8%Other Assets 22.6% 21.2% 25.6% 24.1% 32.9% TOTAL ASSETS 100.0% 100.0% 100.0% 100.0% 100.0%

LIABILITIES:Accounts Payable - Trade 6.6% 7.2% 6.4% 6.0% 5.4%Notes Payable - Non Trade 7.4% 9.8% 9.4% 6.5% 9.1%Current Portion of Long Term Debt 0.0% 0.0% 0.0% 0.0% 0.0%Other Current Liabilities 15.9% 16.5% 13.7% 16.1% 16.6% CURRENT LIABILITIES 29.9% 33.5% 29.5% 28.6% 31.2%Long Term Debt 18.6% 19.4% 26.2% 28.5% 27.5%Deferred Tax 1.4% 1.1% 1.8% 2.6% 2.6%Other Non-Current Liabilities 10.6% 8.4% 6.7% 5.4% 5.1% NON-CURRENT LIABILITIES 30.6% 28.9% 34.7% 36.4% 35.2% TOTAL LIABILITIES 60.5% 62.5% 64.2% 65.1% 66.4%

STOCKHOLDERS' EQUITYPreferred Stock 5.9% 5.5% 5.1% 4.9% 4.0%Common Stock 4.3% 4.1% 3.8% 3.8% 3.2%Additional Paid-in Capital 2.9% 4.2% 5.2% 6.0% 6.1%Retained Earnings 36.0% 33.6% 31.2% 30.4% 29.4%Other Equity Adjustments -5.2% -4.8% -4.1% -4.0% -3.3% SHAREHOLDERS' EQUITY 39.5% 37.5% 35.8% 34.9% 33.6% TOTAL EQUITIES 100.0% 100.0% 100.0% 100.0% 100.0%

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

Wella AG ForecastFIRM NAME: Wella AG CURRENT FORECAST ESTIMATES

Actual Amounts Forecast Amounts Forecasts for Year +11 and beyond:Common Size Percent Forecast assumption Long-Run Growth Rate Assumption 5.0%Rate of Change Percent Forecast assumption explanation Long-Run Growth Factor: 105%

Actuals Forecasts2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

INCOME STATEMENTSales 2,824,106 3,187,100 3,390,416 3,526,033 3,667,074 4,033,781 4,437,159 4,880,875 5,124,919 5,381,165 5,650,223 5,932,735 6,229,371 6,540,840

common size 100.0% 100.0% 100.0% 4.0% 4.0% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0%rate of change 12.9% 6.4% Sales growth rate assumptions.

Cost of Goods Sold 963,329 1,080,572 1,155,407 1,202,377 1,225,463 1,321,049 1,424,091 1,535,170 1,614,350 1,695,067 1,779,820 1,868,811 1,962,252 2,060,365 common size 34.1% 33.9% 34.1% 34.1% 33.4% 32.7% 32.1% 31.5% 31.5% 31.5% 31.5% 31.5% 31.5%

rate of change 12.2% 6.9% Cost of goods sold as % of sales GROSS MARGIN 1,860,777 2,106,528 2,235,009 2,323,656 2,441,611 2,712,732 3,013,069 3,345,706 3,510,570 3,686,098 3,870,403 4,063,923 4,267,119 4,480,475

common size 65.9% 66.1% 65.9% 65.9% 66.6% 67.3% 67.9% 68.5% 68.5% 68.5% 68.5% 68.5% 68.5%rate of change 13.2% 6.1% 4.0% 5.1% 11.1% 11.1% 11.0% 4.9% 5.0% 5.0% 5.0% 5.0%

Selling & Admin. Expense 1,652,884 1,851,011 1,945,684 2,023,943 2,104,900 2,315,390 2,546,930 2,801,622 2,941,704 3,088,789 3,243,228 3,405,390 3,575,659 3,754,442 common size 58.5% 58.1% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4%

rate of change 12.0% 5.1% Selling & Admin. Expenses as % of salesOther Revenues & Gains 74,154 70,654 94,165 88,151 91,677 100,845 110,929 122,022 128,123 134,529 141,256 148,318 155,734 163,521

common size 2.6% 2.2% 2.8% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%rate of change -4.7% 33.3% Other revenue and gains assumptions

Other Expenses & Losses - I 49,651 58,830 74,469 63,469 66,007 72,608 79,869 87,856 92,249 96,861 101,704 106,789 112,129 117,735 common size 1.8% 1.8% 2.2% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%

rate of change 18.5% 26.6% Other expenses and losses assumptions - I. OPERATING MARGIN 232,396 267,341 309,021 324,395 362,380 425,578 497,199 578,249 604,740 634,977 666,726 700,063 735,066 771,819

common size 8.2% 8.4% 9.1% 9.2% 9.9% 10.6% 11.2% 11.8% 11.8% 11.8% 11.8% 11.8% 11.8%rate of change 15.0% 15.6% 5.0% 11.7% 17.4% 16.8% 16.3% 4.6% 5.0% 5.0% 5.0% 5.0%

Interest Income 2,764 316 100 2,116 2,200 2,420 2,662 2,929 3,075 3,229 3,390 3,560 3,738 3,925 common size 0.098% 0.010% 0.003% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

rate of change -88.6% -68.4% Interest rate earned on average financial assetsInterest Expense 50,849 51,780 70,188 56,417 62,340 80,676 88,743 97,618 92,249 96,861 101,704 106,789 112,129 117,735

common size 1.8% 1.6% 2.1% 1.6% 1.7% 2.0% 2.0% 2.0% 1.8% 1.8% 1.8% 1.8% 1.8%rate of change 1.8% 35.6% Interest rate paid on average financial liabilities

Income before Tax 184,311 215,877 238,933 270,094 302,240 347,323 411,118 483,560 515,567 541,345 568,412 596,833 626,675 658,008 common size 6.5% 6.8% 7.0% 7.7% 8.2% 8.6% 9.3% 9.9% 10.1% 10.1% 10.1% 10.1% 10.1%

rate of change 17.1% 10.7% 13.0% 11.9% 14.9% 18.4% 17.6% 6.6% 5.0% 5.0% 5.0% 5.0%Income Tax Expense 83,455 92,281 95,965 108,038 120,896 138,929 164,447 193,424 206,227 216,538 227,365 238,733 250,670 263,203

common size 3.0% 2.9% 2.8% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%rate of change 10.6% 4.0% Effective income tax rate assumptions

NET INCOME 100856 123596 142968 162056 181344 208394 246671 290136 309340 324807 341047 358100 376005 394805

AVAILABLE FOR 3.4% 4.1% 5.1% 4.6% 4.9% 5.2% 5.6% 5.9% 6.0% 6.0% 6.0% 6.0% 6.0% COMMON SHAREHOLDERS 21.3% 22.0% 13.4% 11.9% 14.9% 18.4% 17.6% 6.6% 5.0% 5.0% 5.0% 5.0%

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FIRM NAME: Wella AG CURRENT FORECAST ESTIMATESActual Amounts Forecast Amounts Forecasts for Year +11 and beyond:Common Size Percent Forecast assumption Long-Run Growth Rate Assumption 5.0%Rate of Change Percent Forecast assumption explanation Long-Run Growth Factor: 105%

Actuals Forecasts

0 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

BALANCE SHEETASSETS:

Cash 35,423 58,608 55,449 57,112 58,826 61,767 66,709 72,045 77,809 81,699 85,784 90,073 94,577 99,306 common size 1.7% 2.4% 2.2% 3% 3% 5% 8% 8% 8% 5% 5% 5% 5%

rate of change 65.5% -5.4% Increase in profits will increase cash for Wella excess cash will be used to pay dividends to common shareholdersMarketable Securities 33,751 27,668 18,379 18,930 19,498 20,473 21,497 22,572 23,023 23,484 23,953 24,432 24,921 26,167

common size 1.6% 1.1% 0.7% 3% 3% 5% 5% 5% 2% 2% 2% 2% 2%rate of change -18.0% -33.6% Wella will continue to convert excess cash in short term investments to maximize return on cash

Accounts Receivable - Trade 601,288 653,334 712,650 769,662 831,235 889,421 951,681 999,265 1,049,228 1,091,197 1,134,845 1,180,239 1,227,449 1,288,821 common size 29.2% 26.8% 28.7% 8% 8% 7% 7% 5% 5% 4% 4% 4% 4%

rate of change 8.7% 9.1% Strong sales will mantaing growth on Accounts receivableInventories 410,886 485,029 471,273 485,411 499,974 514,973 525,272 535,778 541,135 546,547 552,012 557,532 563,108 591,263

common size 20.0% 19.9% 19.0% 3% 3% 3% 2% 2% 1% 1% 1% 1% 1%rate of change 18.0% -2.8% Wella will improve its inventory management with investment in technologies and use of synergies

Other Current Assets 242,593 143,148 128,753 148,066 170,276 195,817 225,190 258,968 284,865 313,352 344,687 379,155 417,071 437,925 common size 11.8% 5.9% 5.2% 15% 15% 15% 15% 15% 10% 10% 10% 10% 10%

rate of change -41.0% -10.1% The firm will continue to have the same amount of other current assets CURRENT ASSETS 1,323,941 1,367,787 1,386,504 1,479,182 1,579,808 1,682,452 1,790,348 1,888,628 1,976,061 2,056,279 2,141,282 2,231,433 2,327,125 2,443,482

common size 64.4% 56.2% 55.8% 55.8% 55.8% 55.6% 55.4% 55.0% 54.9% 54.7% 54.5% 54.4% 54.2%rate of change 3.3% 1.4% 6.7% 6.8% 6.5% 6.4% 5.5% 4.6% 4.1% 4.1% 4.2% 4.3%

Investments in Securities 83,197 73,090 77,378 82,021 86,942 92,158 97,688 103,549 107,691 111,999 116,479 121,138 125,983 132,283 common size 4.0% 3.0% 3.1% 6% 6% 6% 6% 6% 4% 4% 4% 4% 4%

rate of change -12.1% 5.9% Wella will increase investment in other enterprisesProperty, Plant & Equipment - at cost 937,480 1,039,160 1,050,111 1,081,614 1,114,063 1,147,485 1,181,909 1,217,366 1,278,235 1,342,147 1,409,254 1,479,717 1,553,702 1,631,387

common size 45.6% 42.7% 42.2% 3% 3% 3% 3% 3% 5% 5% 5% 5% 5%rate of change 10.8% 1.1% Wella will maintain Fix asset level, increase after year 5 to sustain growth

less: Accumulated Depreciation 507,053 575,664 605,851 (627,336) (646,156) (665,541) (685,507) (706,073) (741,376) (778,445) (817,367) (858,236) (901,147) (946,205) common size 24.7% 23.6% 24.4% 0% 0 0 0 0 0 0 0 0 0

rate of change 13.5% 5.2% The firm will maintain the current % of DepreciationOther Assets 218,899 530,676 577,670 635,437 698,981 768,879 845,767 930,343 976,860 1,025,704 1,076,989 1,130,838 1,187,380 1,246,749

common size 10.6% 21.8% 23.2% 10% 10% 10% 10% 10% 5% 5% 5% 5% 5%rate of change 142.4% 8.9% Wella will invest to acquire intangibles like trademarks to continue growing

TOTAL ASSETS 2,056,464 2,435,049 2,485,812 2,650,918 2,833,637 3,025,432 3,230,205 3,433,814 3,597,471 3,757,682 3,926,636 4,104,890 4,293,044 4,507,696 common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

rate of change 18.4% 2.1% 6.6% 6.9% 6.8% 6.8% 6.3% 4.8% 4.5% 4.5% 4.5% 4.6%

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

LIABILITIES:Accounts Payable - Trade 186,948 195,823 206,592 212,790 219,173 225,749 232,521 239,497 241,892 244,311 246,754 249,221 251,713 264,299

common size 9.1% 8.0% 8.3% 3% 3% 3% 3% 3% 1% 1% 1% 1% 1%rate of change 4.7% 5.5% The firm will maintain its accounts payble and improving them after 5 years

Notes Payable - Non Trade 17,173 12,395 13,819 14,510 15,235 15,997 16,797 17,637 18,166 18,711 19,272 19,851 20,446 21,468 common size 0.8% 0.5% 0.6% 5% 5% 5% 5% 5% 3% 3% 3% 3% 3%

rate of change -27.8% 11.5% Increase of 5% for the first 5 years, decrease to 3% thereafterCurrent Portion of Long Term Debt 208,893 336,426 410,249 451,274 496,401 546,041 600,646 660,710 693,746 728,433 764,855 803,097 843,252 885,415

common size 10.2% 13.8% 16.5% 10% 10% 10% 10% 10% 5% 5% 5% 5% 5%rate of change 61.1% 21.9% Increase to 10% for the first 5 years as large portion of the debt becomes due and the firm seeks to improve its leverage ratios and maintain current credit rating.

Other Current Liabilities 204,642 267,064 282,267 293,558 305,300 317,512 330,212 340,119 350,322 360,832 368,049 375,410 382,918 402,064 common size 10.0% 11.0% 11.4% 4% 4% 4% 4% 3% 3% 3% 2% 2% 2%

rate of change 30.5% 5.7% The firm will maintain its current level of other current liabilities CURRENT LIABILITIES 617,656 811,708 912,927 972,131 1,036,110 1,105,299 1,180,176 1,257,963 1,304,126 1,352,287 1,398,929 1,447,579 1,498,330 1,573,246

common size 30.0% 33.3% 36.7% 36.7% 36.6% 36.5% 36.5% 36.6% 36.3% 36.0% 35.6% 35.3% 34.9%rate of change 31.4% 12.5% 6.5% 6.6% 6.7% 6.8% 6.6% 3.7% 3.7% 3.4% 3.5% 3.5%

Long Term Debt 377,414 534,304 465,615 442,334 420,218 411,813 403,577 395,505 399,460 403,455 407,490 411,564 415,680 436,464 common size 18.4% 21.9% 18.7% -5% -5% -2% -2% -2% 1% 1% 1% 1% 1%

rate of change 41.6% -12.9% Wella would seek to reduce its debt to improve leverage ratio and credit rating. Deferred Tax 90,266 94,122 108,148 113,555 119,233 125,195 131,455 138,027 144,929 152,175 159,784 167,773 176,162 184,970

common size 4.4% 3.9% 4.4% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%rate of change 4.3% 14.9% The firm will continue to have the same % level of deferred taxes

Other Non-Current Liabilities 378,260 352,588 370,103 381,206 392,642 404,422 416,554 433,216 450,545 468,567 487,309 506,802 527,074 553,428 common size 18.4% 14.5% 14.9% 3% 3% 3% 3% 4% 4% 4% 4% 4% 4%

rate of change -6.8% 5.0% The firm will decreased other non-current liabilities due to consolidation I the industry TOTAL LIABILITIES 1,463,596 1,792,722 1,856,793 1,909,227 1,968,203 2,046,729 2,131,762 2,224,712 2,299,060 2,376,484 2,453,512 2,533,718 2,617,245 2,748,108

common size 71.2% 73.6% 74.7% 72.0% 69.5% 67.7% 66.0% 64.8% 63.9% 63.2% 62.5% 61.7% 61.0%rate of change 22.5% 3.6% 2.8% 3.1% 4.0% 4.2% 4.4% 3.3% 3.4% 3.2% 3.3% 3.3%

STOCKHOLDERS' EQUITYPreferred Stock 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 24,550

common size 1.1% 1.0% 0.9% 0 0 0 0 0 0 0 0 0 0rate of change 0.0% 0.0% Wella will maintain its current equity structure

Common Stock and Paid in Capital 133,830 135,220 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 140,522 common size 6.5% 5.6% 5.4% 0 0 0 0 0 0 0 0 0 0

rate of change 1.0% -1.0% No change on common stockRetained Earnings 426,223 511,677 613,739 660,418 784,161 897,431 1,017,170 1,127,830 1,217,138 1,299,926 1,391,850 1,489,898 1,594,525 1,674,252

common size 20.7% 21.0% 24.7% 10% 10% 15% 15% 15% 15% 15% 15% 15% 15%rate of change 20.0% 19.9% Add net income and subtract implied dividends; enter dividends payout rate assumptions above.

Treasury Stock (14,794) (51,410) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (79,735) common size -0.7% -2.1% -3.1% 0 0 0 0 0 0 0 0 0 0

rate of change 247.5% 47.7% Wella will maintain its current equity structure SHAREHOLDERS' EQUITY 592,868 642,327 629,019 741,691 865,434 978,704 1,098,443 1,209,103 1,298,411 1,381,199 1,473,123 1,571,171 1,675,798 1,759,588

common size 28.8% 26.4% 25.3% 28.0% 30.5% 32.3% 34.0% 35.2% 36.1% 36.8% 37.5% 38.3% 39.0%rate of change 8.3% -2.1% 17.9% 16.7% 13.1% 12.2% 10.1% 7.4% 6.4% 6.7% 6.7% 6.7%

TOTAL LIABILITIES AND EQUITIES 2,056,464 2,435,049 2,485,812 2,650,918 2,833,637 3,025,432 3,230,205 3,433,814 3,597,471 3,757,682 3,926,636 4,104,890 4,293,044 4,507,696

common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%rate of change 18.4% 2.1% 6.6% 6.9% 6.8% 6.8% 6.3% 4.8% 4.5% 4.5% 4.5% 4.6%

Adjustment needed to balance the balance sheet:(99,172) (39,466) (63,865) (89,931) (135,956) (173,631) (193,298) (197,966) (206,337) (214,977) -

Account adjusted: DividendsDividends forecast:

16,206 18,134 31,259 37,001 43,520 46,401 48,721 51,157 53,715 56,401 315,079 99,172 39,466 63,865 89,931 135,956 173,631 193,298 197,966 206,337 214,977 -

115,378 57,601 95,125 126,932 179,476 220,032 242,019 249,123 260,052 271,378 315,079

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FIRM NAME: Wella AG CURRENT FORECAST ESTIMATESANALYST NAME:

Forecasts2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

IMPLIED STATEMENT OF CASH FLOWSThe following statements of cash flows are derived from the above income statements and balance sheets, and are not the reported statements of cash flows.

NET INCOME 123,596 142,968 162,056 181,344 208,394 246,671 290,136 309,340 324,807 341,047 358,100 376,005 394,805 Depreciation and Amortization 68,611 30,187 21,485 18,820 19,385 19,966 20,565 35,304 37,069 38,922 40,868 42,912 45,057 WORKING CAPITAL FROM OPS 192,207 173,155 183,542 200,164 227,779 266,637 310,701 344,644 361,876 379,970 398,968 418,917 439,862 (Incr.) Decrease in Receivables - Trade (52,046) (59,316) (57,012) (61,573) (58,186) (62,259) (47,584) (49,963) (41,969) (43,648) (45,394) (47,210) (61,372) (Incr.) Decrease in Inventories (74,143) 13,756 (14,138) (14,562) (14,999) (10,299) (10,505) (5,358) (5,411) (5,465) (5,520) (5,575) (28,155) (Incr.) Decr. in Other Curr. Assets 99,445 14,395 (19,313) (22,210) (25,541) (29,373) (33,778) (25,897) (28,487) (31,335) (34,469) (37,916) (20,854) Incr. (Decr.) in Acct. Payable - Trade 8,875 10,769 6,198 6,384 6,575 6,772 6,976 2,395 2,419 2,443 2,468 2,492 12,586 Incr. (Decr.) in Other Current Liabilities 62,422 15,203 11,291 11,742 12,212 12,700 9,906 10,204 10,510 7,217 7,361 7,508 19,146 Incr. (Decr.) in Deferred Tax 3,856 14,026 5,407 5,678 5,962 6,260 6,573 6,901 7,246 7,609 7,989 8,389 8,808 Incr. (Decr.) in Other Non-Current Liabilities (25,672) 17,515 11,103 11,436 11,779 12,133 16,662 17,329 18,022 18,743 19,492 20,272 26,354 NET CF FROM OPERATIONS 214,944 199,503 127,078 137,059 165,580 202,571 258,950 300,254 324,206 335,532 350,896 366,877 396,374 (Incr.) Decrease in Prop., Plant, Equip. (101,680) (10,951) (31,503) (32,448) (33,422) (34,425) (35,457) (60,868) (63,912) (67,107) (70,463) (73,986) (77,685) (Incr.) Decrease in Marketable Securities 6,083 9,289 (551) (568) (975) (1,024) (1,075) (451) (460) (470) (479) (489) (1,246) (Incr.) Decrease in Investment Securities 10,107 (4,288) (4,643) (4,921) (5,217) (5,530) (5,861) (4,142) (4,308) (4,480) (4,659) (4,846) (6,299) (Incr.) Decrease in Other Assets (311,777) (46,994) (57,767) (63,544) (69,898) (76,888) (84,577) (46,517) (48,843) (51,285) (53,849) (56,542) (59,369) NET CF FROM INVESTING (397,267) (52,944) (94,464) (101,481) (109,511) (117,866) (126,970) (111,979) (117,523) (123,342) (129,450) (135,862) (144,599) Incr. (Decr.) in ST Debt 122,755 75,247 691 725 762 800 840 529 545 561 578 596 1,022 Incr. (Decr.) in LT Debt 156,890 (68,689) 17,744 23,011 41,236 46,368 51,993 36,991 38,682 40,456 42,318 44,271 62,947 Incr. (Decr.) in Com. Stock and Paid in Capital 1,390 (1,390) - - - - - - - - - - 6,692 Incr. (Decr.) in Accum. OCI and Oth. Eq. Adjs. (769) (89,452) 65,993 - - - - - - - - - - Incr. (Decr.) in Treasury Stock (36,616) (24,528) - - - - - - - - - - (3,797) Dividends (Common) (38,142) (40,906) (115,378) (57,601) (95,125) (126,932) (179,476) (220,032) (242,019) (249,123) (260,052) (271,378) (315,079) NET CF FROM FINANCING 205,508 (149,718) (30,950) (33,864) (53,127) (79,764) (126,644) (182,512) (202,792) (208,105) (217,156) (226,512) (247,046) NET CHANGE IN CASH 23,185 (3,159) 1,663 1,713 2,941 4,941 5,337 5,764 3,890 4,085 4,289 4,504 4,729

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FIRM NAME: Wella AG CURRENT FORECAST RATIO ANALYSISForecasts for Year +11 and beyond:

Long-Run Growth Rate Assumption 5.0%

Actuals Forecasts2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

FORECAST VALIDITY CHECK DATA:GROWTH

Sales Growth Rates: 19.1% 12.9% 6.4% 4.0% 4.0% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Net Income Growth Rates: 25.8% 22.5% 15.7% 13.4% 11.9% 14.9% 18.4% 17.6% 6.6% 5.0% 5.0% 5.0% 5.0% 5.0%Total Asset Growth Rates 7.8% 18.4% 2.1% 6.6% 6.9% 6.8% 6.8% 6.3% 4.8% 4.5% 4.5% 4.5% 4.6% 5.0%

RETURN ON ASSETS: Profit Margin for ROA 4.7% 4.9% 5.5% 5.6% 6.0% 6.4% 6.8% 7.1% 7.1% 7.1% 7.1% 7.1% 7.1% 7.1%

x Asset Turnover 1.4 1.4 1.4 1.4 1.3 1.4 1.4 1.5 1.5 1.5 1.5 1.5 1.5 1.5= Return on Assets 6.6% 6.9% 7.5% 7.6% 8.0% 8.8% 9.6% 10.5% 10.4% 10.4% 10.5% 10.5% 10.6% 10.6%

RETURN ON COMMON EQUITY: Profit Margin for ROCE 3.6% 3.9% 4.2% 4.6% 4.9% 5.2% 5.6% 5.9% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

x Asset Turnover 1.4 1.4 1.4 1.4 1.3 1.4 1.4 1.5 1.5 1.5 1.5 1.5 1.5 1.5x Capital Structure Leverage 3.7 3.8 4.0 3.9 3.5 3.3 3.1 2.9 2.9 2.8 2.7 2.7 2.6 2.6= Return on Common Equity 18.7% 20.8% 23.3% 24.5% 23.2% 23.2% 24.3% 25.7% 25.1% 24.7% 24.3% 23.9% 23.5% 23.3%

OPERATING PERFORMANCE:Gross Margin / Sales 65.9% 66.1% 65.9% 65.9% 66.6% 67.3% 67.9% 68.5% 68.5% 68.5% 68.5% 68.5% 68.5% 68.5%

Operating Profit Before Taxes / Revenues 8.0% 8.2% 8.9% 9.2% 9.9% 10.6% 11.2% 11.8% 11.8% 11.8% 11.8% 11.8% 11.8% 11.8%

ASSET TURNOVER:Sales / Avg. Accounts Receivable 4.8 5.1 5.0 4.8 4.6 4.7 4.8 5.0 5.0 5.0 5.1 5.1 5.2 5.2

COGS / Average Inventory 2.6 2.4 2.4 2.5 2.5 2.6 2.7 2.9 3.0 3.1 3.2 3.4 3.5 3.6Sales / Average Fixed Assets 6.9 7.1 7.5 3.3 2.1 2.3 2.4 2.6 2.6 2.6 2.6 2.6 2.6 2.6

LIQUIDITY:Current Ratio 2.1 1.7 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.6 1.6

Quick Ratio 1.1 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9

SOLVENCY:Total Liabilities / Total Assets 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.6Total Liabilities / Total Equity 2.5 2.8 3.0 2.6 2.3 2.1 1.9 1.8 1.8 1.7 1.7 1.6 1.6 1.6

Interest Coverage Ratio 4.6 5.2 4.4 5.8 5.8 5.3 5.6 6.0 6.6 6.6 6.6 6.6 6.6 6.6

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

Wella ValuationsFSAP OUTPUT: VALUATIONFIRM NAME: Wella AG

Continuing1 2 3 4 5 6 7 8 9 10 Value

RESIDUAL INCOME VALUATION 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Comprehensive Income Available for Common Shareholders 162,056 181,344 208,394 246,671 290,136 309,340 324,807 341,047 358,100 376,005 394,805 Book Value of Common Shareholders' Equity (at t-1) 605,638 718,310 842,053 955,323 1,075,062 1,185,722 1,275,030 1,357,818 1,449,742 1,547,790 1,652,417 Required Earnings 69,975 82,993 97,291 110,378 124,213 136,998 147,317 156,882 167,503 178,832 190,920 Residual Income 92,081 98,351 111,103 136,293 165,924 172,342 177,490 184,165 190,597 197,173 203,885

Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Residual Income 82,544 79,033 80,033 88,010 96,047 89,429 82,562 76,794 71,244 66,069 Sum of PV Residual Income 811,764 PV of Continuing Value 1,042,382 Total 1,854,146 Add: Beginning Book Value of Equity 605,638 PV of Equity 2,459,784 Adjust to midyear discounting 1.06 Total PV of Equity 2,601,886 Shares Outstanding 44,136 Estimated Value per Share 58.95

Current share price 58 Percent difference 2%(Value/price)-1: positive number indicates underpricing.

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG

ContinuingRESIDUAL INCOME VALUATION 1 2 3 4 5 6 7 8 9 10 ValueMarket-to-Book Approach 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Comprehensive Income Available for Common Shareholders 162,056 181,344 208,394 246,671 290,136 309,340 324,807 341,047 358,100 376,005 394,805 Book Value of Common Shareholders' Equity (at t-1) 605,638 718,310 842,053 955,323 1,075,062 1,185,722 1,275,030 1,357,818 1,449,742 1,547,790 1,652,417 Implied ROCE 0.27 0.25 0.25 0.26 0.27 0.26 0.25 0.25 0.25 0.24 0.24 Residual ROCE 0.15 0.14 0.13 0.14 0.15 0.15 0.14 0.14 0.13 0.13 0.12 Cumulative growth factor as of t-1 1.00 1.19 1.39 1.58 1.78 1.96 2.11 2.24 2.39 2.56 2.73 Residual ROCE times growth 0.15 0.16 0.18 0.23 0.27 0.28 0.29 0.30 0.31 0.33 0.34 Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Residual ROCE times growth 0.14 0.13 0.13 0.15 0.16 0.15 0.14 0.13 0.12 0.11 Sum of PV Residual ROCE times growth 1.34 PV of Continuing Value 1.72 Total PV Residual ROCE 3.06 Add one for book value of equity at t-1 1.00 Sum 4.06 Adjust to mid-year discounting 1.06 Implied Market-to-Book Ratio 4.30 Times Beginning Book Value of Equity 605,638 Total PV of Equity 2,601,886 Shares Outstanding 44,136 Estimated Value per Share 58.95

Current share price 57.75 Percent difference 2%Sensitivity analysis for the market-to-book approach should be identical to that of the residual income approach.

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG

Continuing1 2 3 4 5 6 7 8 9 10 Value

DIVIDENDS BASED VALUATION 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Dividends Paid to Common Shareholders 115,378 57,601 95,125 126,932 179,476 220,032 242,019 249,123 260,052 271,378 Less: Common Stock Issues - - - - - - - - - - Plus: Common Stock Repurchases - - - - - - - - - - All-Inclusive Dividends to Common Equity 115,378 57,601 95,125 126,932 179,476 220,032 242,019 249,123 260,052 271,378 312,184 Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Net Dividends 103,428 46,287 68,523 81,965 103,892 114,176 112,578 103,880 97,206 90,933 Sum of PV Net Dividends 922,868 PV of Continuing Value 1,596,074 Total 2,518,942 Adjust to midyear discounting 1.06 Total PV Dividends 2,664,462 Shares Outstanding 44,136 Estimated Value per Share 60.37

Current share price 57.75 Percent difference 5%(Value/price)-1: positive number indicates underpricing.

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

Wella AG Forecast based on €300M synergies estimated by P&GFIRM NAME: Wella AG FORECAST BASED ON €300M SYNERGIES GENERATED

Actual Amounts Forecast Amounts Forecasts for Year +11 and beyond:Common Size Percent Forecast assumption Long-Run Growth Rate Assumption 5.0%Rate of Change Percent Forecast assumption explanation Long-Run Growth Factor: 105%

Actuals Forecasts2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

INCOME STATEMENTSales 2,824,106 3,187,100 3,390,416 3,526,033 3,667,074 4,033,781 4,437,159 4,880,875 5,124,919 5,381,165 5,650,223 5,932,735 6,229,371 6,540,840

common size 100.0% 100.0% 100.0% 4.0% 4.0% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0%rate of change 12.9% 6.4% Sales growth rate assumptions.

Cost of Goods Sold 963,329 1,080,572 1,155,407 1,131,856 1,153,588 1,243,568 1,340,566 1,445,130 1,614,350 1,695,067 1,779,820 1,868,811 1,962,252 2,060,365 common size 34.1% 33.9% 34.1% 32.1% 31.5% 30.8% 30.2% 29.6% 31.5% 31.5% 31.5% 31.5% 31.5%

rate of change 12.2% 6.9% Decrease on 2% of CGS as P&G market power improves the firm raw materials cost improvements will continue until year 5; constant thereafter GROSS MARGIN 1,860,777 2,106,528 2,235,009 2,394,176 2,513,486 2,790,213 3,096,593 3,435,745 3,510,570 3,686,098 3,870,403 4,063,923 4,267,119 4,480,475

common size 65.9% 66.1% 65.9% 67.9% 68.5% 69.2% 69.8% 70.4% 68.5% 68.5% 68.5% 68.5% 68.5%rate of change 13.2% 6.1% 7.1% 5.0% 11.0% 11.0% 11.0% 2.2% 5.0% 5.0% 5.0% 5.0%

Selling & Admin. Expense 1,652,884 1,851,011 1,945,684 2,023,943 2,104,900 2,315,390 2,546,930 2,801,622 2,941,704 3,088,789 3,243,228 3,405,390 3,575,659 3,754,442 common size 58.5% 58.1% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4% 57.4%

rate of change 12.0% 5.1% Selling & Admin. Expenses as % of salesOther Revenues & Gains 74,154 70,654 94,165 88,151 91,677 100,845 110,929 122,022 128,123 134,529 141,256 148,318 155,734 163,521

common size 2.6% 2.2% 2.8% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%rate of change -4.7% 33.3% Other revenue and gains assumptions

Other Expenses & Losses - I 49,651 58,830 74,469 63,469 66,007 72,608 79,869 87,856 92,249 96,861 101,704 106,789 112,129 117,735 common size 1.8% 1.8% 2.2% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%

rate of change 18.5% 26.6% Other expenses and losses assumptions - I. OPERATING MARGIN 232,396 267,341 309,021 394,916 434,255 503,059 580,724 668,289 604,740 634,977 666,726 700,063 735,066 771,819

common size 8.2% 8.4% 9.1% 11.2% 11.8% 12.5% 13.1% 13.7% 11.8% 11.8% 11.8% 11.8% 11.8%rate of change 15.0% 15.6% 27.8% 10.0% 15.8% 15.4% 15.1% -9.5% 5.0% 5.0% 5.0% 5.0%

Interest Income 2,764 316 100 2,116 2,200 2,420 2,662 2,929 3,075 3,229 3,390 3,560 3,738 3,925 common size 0.098% 0.010% 0.003% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

rate of change -88.6% -68.4% Interest rate earned on average financial assetsInterest Expense 50,849 51,780 70,188 56,417 62,340 80,676 88,743 97,618 92,249 96,861 101,704 106,789 112,129 117,735

common size 1.8% 1.6% 2.1% 1.6% 1.7% 2.0% 2.0% 2.0% 1.8% 1.8% 1.8% 1.8% 1.8%rate of change 1.8% 35.6% Interest rate paid on average financial liabilities

Income before Tax 184,311 215,877 238,933 340,615 374,115 424,804 494,643 573,600 515,567 541,345 568,412 596,833 626,675 658,008 common size 6.5% 6.8% 7.0% 9.7% 10.2% 10.5% 11.1% 11.8% 10.1% 10.1% 10.1% 10.1% 10.1%

rate of change 17.1% 10.7% 42.6% 9.8% 13.5% 16.4% 16.0% -10.1% 5.0% 5.0% 5.0% 5.0%Income Tax Expense 83,455 92,281 95,965 136,246 149,646 169,922 197,857 229,440 206,227 216,538 227,365 238,733 250,670 263,203

common size 3.0% 2.9% 2.8% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%rate of change 10.6% 4.0% Effective income tax rate assumptions

NET INCOME 100856 123596 142968 204369 224469 254882 296786 344160 309340 324807 341047 358100 376005 394805

AVAILABLE FOR 3.4% 4.1% 5.1% 5.8% 6.1% 6.3% 6.7% 7.1% 6.0% 6.0% 6.0% 6.0% 6.0% COMMON SHAREHOLDERS 21.3% 22.0% 42.9% 9.8% 13.5% 16.4% 16.0% -10.1% 5.0% 5.0% 5.0% 5.0%

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FIRM NAME: Wella AG FORECAST BASED ON €300M SYNERGIES GENERATEDActual Amounts Forecast Amounts Forecasts for Year +11 and beyond:Common Size Percent Forecast assumption Long-Run Growth Rate Assumption 5.0%Rate of Change Percent Forecast assumption explanation Long-Run Growth Factor: 105%

Actuals Forecasts

0 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

BALANCE SHEETASSETS:

Cash 35,423 58,608 55,449 60,994 67,093 73,803 78,969 84,497 90,411 94,932 99,679 104,662 109,896 115,390 common size 1.7% 2.4% 2.2% 10% 10% 10% 7% 7% 7% 5% 5% 5% 5%

rate of change 65.5% -5.4% Increases in cash due to more effective collection of receivablesMarketable Securities 33,751 27,668 18,379 18,930 19,498 20,473 21,497 22,572 23,023 23,484 23,953 24,432 24,921 26,167

common size 1.6% 1.1% 0.7% 3% 3% 5% 5% 5% 2% 2% 2% 2% 2%rate of change -18.0% -33.6% Wella will continue to convert excess cash in short term investments to maximize return on cash

Accounts Receivable - Trade 601,288 653,334 712,650 748,283 785,697 809,268 833,546 858,552 884,308 919,681 956,468 994,727 1,034,516 1,086,242 common size 29.2% 26.8% 28.7% 5% 5% 3% 3% 3% 3% 4% 4% 4% 4%

rate of change 8.7% 9.1% Drop in the growth of receivables consequence of improvement of collection practices, cash will consequently increaseInventories 410,886 485,029 471,273 457,135 443,421 421,250 425,462 429,717 434,014 438,354 442,738 447,165 451,637 474,219

common size 20.0% 19.9% 19.0% -3% -3% -5% 1% 1% 1% 1% 1% 1% 1%rate of change 18.0% -2.8% P&G will reduce considerable inventory leve by the application of its propetary inventory management systems

Other Current Assets 242,593 143,148 128,753 148,066 170,276 195,817 225,190 258,968 284,865 313,352 344,687 379,155 417,071 437,925 common size 11.8% 5.9% 5.2% 15% 15% 15% 15% 15% 10% 10% 10% 10% 10%

rate of change -41.0% -10.1% The firm will continue to have the same amount of other current assets CURRENT ASSETS 1,323,941 1,367,787 1,386,504 1,433,408 1,485,985 1,520,610 1,584,663 1,654,305 1,716,622 1,789,802 1,867,524 1,950,142 2,038,040 2,139,942

common size 64.4% 56.2% 55.8% 55.0% 54.2% 53.1% 52.4% 51.7% 51.4% 51.3% 51.1% 51.0% 50.9%rate of change 3.3% 1.4% 3.4% 3.7% 2.3% 4.2% 4.4% 3.8% 4.3% 4.3% 4.4% 4.5%

Investments in Securities 83,197 73,090 77,378 82,021 86,942 92,158 97,688 103,549 107,691 111,999 116,479 121,138 125,983 132,283 common size 4.0% 3.0% 3.1% 6% 6% 6% 6% 6% 4% 4% 4% 4% 4%

rate of change -12.1% 5.9% Wella will increase investment in other enterprisesProperty, Plant & Equipment - at cost 937,480 1,039,160 1,050,111 1,081,614 1,114,063 1,147,485 1,181,909 1,217,366 1,278,235 1,342,147 1,409,254 1,479,717 1,553,702 1,631,387

common size 45.6% 42.7% 42.2% 3% 3% 3% 3% 3% 5% 5% 5% 5% 5%rate of change 10.8% 1.1% Wella will maintain Fix asset level, increase after year 5 to sustain growth

less: Accumulated Depreciation 507,053 575,664 605,851 (627,336) (646,156) (665,541) (685,507) (706,073) (741,376) (778,445) (817,367) (858,236) (901,147) (946,205) common size 24.7% 23.6% 24.4% 0% 0 0 0 0 0 0 0 0 0

rate of change 13.5% 5.2% The firm will maintain the current % of DepreciationOther Assets 218,899 530,676 577,670 635,437 698,981 768,879 845,767 930,343 976,860 1,025,704 1,076,989 1,130,838 1,187,380 1,246,749

common size 10.6% 21.8% 23.2% 10% 10% 10% 10% 10% 5% 5% 5% 5% 5%rate of change 142.4% 8.9% Wella will invest to acquire intangibles like trademarks to continue growing

TOTAL ASSETS 2,056,464 2,435,049 2,485,812 2,605,143 2,739,814 2,863,591 3,024,520 3,199,492 3,338,032 3,491,206 3,652,878 3,823,599 4,003,959 4,204,157 common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

rate of change 18.4% 2.1% 4.8% 5.2% 4.5% 5.6% 5.8% 4.3% 4.6% 4.6% 4.7% 4.7%

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

LIABILITIES:Accounts Payable - Trade 186,948 195,823 206,592 212,790 219,173 225,749 232,521 239,497 241,892 244,311 246,754 249,221 251,713 264,299

common size 9.1% 8.0% 8.3% 3% 3% 3% 3% 3% 1% 1% 1% 1% 1%rate of change 4.7% 5.5% The firm will maintain its accounts payble and improving them after 5 years

Notes Payable - Non Trade 17,173 12,395 13,819 14,510 15,235 15,997 16,797 17,637 18,166 18,711 19,272 19,851 20,446 21,468 common size 0.8% 0.5% 0.6% 5% 5% 5% 5% 5% 3% 3% 3% 3% 3%

rate of change -27.8% 11.5% Increase of 5% for the first 5 years, decrease to 3% thereafterCurrent Portion of Long Term Debt 208,893 336,426 410,249 451,274 496,401 546,041 600,646 660,710 693,746 728,433 764,855 803,097 843,252 885,415

common size 10.2% 13.8% 16.5% 10% 10% 10% 10% 10% 5% 5% 5% 5% 5%rate of change 61.1% 21.9% Increase to 10% for the first 5 years as large portion of the debt becomes due and the firm seeks to improve its leverage ratios and maintain current credit rating, after that a 5% increase forecasted

Other Current Liabilities 204,642 267,064 282,267 293,558 305,300 317,512 330,212 340,119 350,322 360,832 368,049 375,410 382,918 402,064 common size 10.0% 11.0% 11.4% 4% 4% 4% 4% 3% 3% 3% 2% 2% 2%

rate of change 30.5% 5.7% The firm will maintain its current level of other current liabilities CURRENT LIABILITIES 617,656 811,708 912,927 972,131 1,036,110 1,105,299 1,180,176 1,257,963 1,304,126 1,352,287 1,398,929 1,447,579 1,498,330 1,573,246

common size 30.0% 33.3% 36.7% 37.3% 37.8% 38.6% 39.0% 39.3% 39.1% 38.7% 38.3% 37.9% 37.4%rate of change 31.4% 12.5% 6.5% 6.6% 6.7% 6.8% 6.6% 3.7% 3.7% 3.4% 3.5% 3.5%

Long Term Debt 377,414 534,304 465,615 442,334 420,218 411,813 403,577 395,505 399,460 403,455 407,490 411,564 415,680 436,464 common size 18.4% 21.9% 18.7% -5% -5% -2% -2% -2% 1% 1% 1% 1% 1%

rate of change 41.6% -12.9% Wella would seek to reduce its debt to improve leverage ratio and credit rating. Deferred Tax 90,266 94,122 108,148 113,555 119,233 125,195 131,455 138,027 144,929 152,175 159,784 167,773 176,162 184,970

common size 4.4% 3.9% 4.4% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%rate of change 4.3% 14.9% The firm will continue to have the same % level of deferred taxes

Other Non-Current Liabilities 378,260 352,588 370,103 381,206 392,642 404,422 416,554 433,216 450,545 468,567 487,309 506,802 527,074 553,428 common size 18.4% 14.5% 14.9% 3% 3% 3% 3% 4% 4% 4% 4% 4% 4%

rate of change -6.8% 5.0% The firm will decreased other non-current liabilities due to consolidation I the industry TOTAL LIABILITIES 1,463,596 1,792,722 1,856,793 1,909,227 1,968,203 2,046,729 2,131,762 2,224,712 2,299,060 2,376,484 2,453,512 2,533,718 2,617,245 2,748,108

common size 71.2% 73.6% 74.7% 73.3% 71.8% 71.5% 70.5% 69.5% 68.9% 68.1% 67.2% 66.3% 65.4%rate of change 22.5% 3.6% 2.8% 3.1% 4.0% 4.2% 4.4% 3.3% 3.4% 3.2% 3.3% 3.3%

STOCKHOLDERS' EQUITYPreferred Stock 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 23,381 24,550

common size 1.1% 1.0% 0.9% 0 0 0 0 0 0 0 0 0 0rate of change 0.0% 0.0% Wella will maintain its current equity structure

Common Stock and Paid in Capital 133,830 135,220 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 133,830 140,522 common size 6.5% 5.6% 5.4% 0 0 0 0 0 0 0 0 0 0

rate of change 1.0% -1.0% No change on common stockRetained Earnings 426,223 511,677 613,739 614,643 690,338 735,589 811,485 893,507 957,699 1,033,449 1,118,093 1,208,608 1,305,440 1,370,712

common size 20.7% 21.0% 24.7% 10% 10% 15% 15% 15% 15% 15% 15% 15% 15%rate of change 20.0% 19.9% Add net income and subtract implied dividends; enter dividends payout rate assumptions above.

Treasury Stock (14,794) (51,410) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (75,938) (79,735) common size -0.7% -2.1% -3.1% 0 0 0 0 0 0 0 0 0 0

rate of change 247.5% 47.7% Treasury stock assumptions SHAREHOLDERS' EQUITY 592,868 642,327 629,019 695,916 771,611 816,862 892,758 974,780 1,038,972 1,114,722 1,199,366 1,289,881 1,386,713 1,456,049

common size 28.8% 26.4% 25.3% 26.7% 28.2% 28.5% 29.5% 30.5% 31.1% 31.9% 32.8% 33.7% 34.6%rate of change 8.3% -2.1% 10.6% 10.9% 5.9% 9.3% 9.2% 6.6% 7.3% 7.6% 7.5% 7.5%

TOTAL LIABILITIES AND EQUITIES 2,056,464 2,435,049 2,485,812 2,605,143 2,739,814 2,863,591 3,024,520 3,199,492 3,338,032 3,491,206 3,652,878 3,823,599 4,003,959 4,204,157

common size 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%rate of change 18.4% 2.1% 4.8% 5.2% 4.5% 5.6% 5.8% 4.3% 4.6% 4.6% 4.7% 4.7%

Adjustment needed to balance the balance sheet:(183,028) (126,328) (171,398) (176,372) (210,513) (198,747) (200,336) (205,247) (213,870) (222,772) -

Account adjusted: DividendsDividends forecast:

20,437 22,447 38,232 44,518 51,624 46,401 48,721 51,157 53,715 56,401 329,533 183,028 126,328 171,398 176,372 210,513 198,747 200,336 205,247 213,870 222,772 - 203,465 148,775 209,631 220,890 262,137 245,148 249,057 256,404 267,585 279,173 329,533

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FIRM NAME: Wella AG FORECAST BASED ON €300M SYNERGIES GENERATEDANALYST NAME:

Forecasts2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

IMPLIED STATEMENT OF CASH FLOWSThe following statements of cash flows are derived from the above income statements and balance sheets, and are not the reported statements of cash flows.

NET INCOME 123,596 142,968 204,369 224,469 254,882 296,786 344,160 309,340 324,807 341,047 358,100 376,005 394,805 Depreciation and Amortization 68,611 30,187 21,485 18,820 19,385 19,966 20,565 35,304 37,069 38,922 40,868 42,912 45,057 WORKING CAPITAL FROM OPS 192,207 173,155 225,854 243,289 274,267 316,752 364,725 344,644 361,876 379,970 398,968 418,917 439,862 (Incr.) Decrease in Receivables - Trade (52,046) (59,316) (35,633) (37,414) (23,571) (24,278) (25,006) (25,757) (35,372) (36,787) (38,259) (39,789) (51,726) (Incr.) Decrease in Inventories (74,143) 13,756 14,138 13,714 22,171 (4,212) (4,255) (4,297) (4,340) (4,384) (4,427) (4,472) (22,582) (Incr.) Decr. in Other Curr. Assets 99,445 14,395 (19,313) (22,210) (25,541) (29,373) (33,778) (25,897) (28,487) (31,335) (34,469) (37,916) (20,854) Incr. (Decr.) in Acct. Payable - Trade 8,875 10,769 6,198 6,384 6,575 6,772 6,976 2,395 2,419 2,443 2,468 2,492 12,586 Incr. (Decr.) in Other Current Liabilities 62,422 15,203 11,291 11,742 12,212 12,700 9,906 10,204 10,510 7,217 7,361 7,508 19,146 Incr. (Decr.) in Deferred Tax 3,856 14,026 5,407 5,678 5,962 6,260 6,573 6,901 7,246 7,609 7,989 8,389 8,808 Incr. (Decr.) in Other Non-Current Liabilities (25,672) 17,515 11,103 11,436 11,779 12,133 16,662 17,329 18,022 18,743 19,492 20,272 26,354 NET CF FROM OPERATIONS 214,944 199,503 219,046 232,619 283,854 296,754 341,802 325,522 331,874 343,475 359,124 375,401 411,595 (Incr.) Decrease in Prop., Plant, Equip. (101,680) (10,951) (31,503) (32,448) (33,422) (34,425) (35,457) (60,868) (63,912) (67,107) (70,463) (73,986) (77,685) (Incr.) Decrease in Marketable Securities 6,083 9,289 (551) (568) (975) (1,024) (1,075) (451) (460) (470) (479) (489) (1,246) (Incr.) Decrease in Investment Securities 10,107 (4,288) (4,643) (4,921) (5,217) (5,530) (5,861) (4,142) (4,308) (4,480) (4,659) (4,846) (6,299) (Incr.) Decrease in Other Assets (311,777) (46,994) (57,767) (63,544) (69,898) (76,888) (84,577) (46,517) (48,843) (51,285) (53,849) (56,542) (59,369) NET CF FROM INVESTING (397,267) (52,944) (94,464) (101,481) (109,511) (117,866) (126,970) (111,979) (117,523) (123,342) (129,450) (135,862) (144,599) Incr. (Decr.) in ST Debt 122,755 75,247 691 725 762 800 840 529 545 561 578 596 1,022 Incr. (Decr.) in LT Debt 156,890 (68,689) 17,744 23,011 41,236 46,368 51,993 36,991 38,682 40,456 42,318 44,271 62,947 Incr. (Decr.) in Com. Stock and Paid in Capital 1,390 (1,390) - - - - - - - - - - 6,692 Incr. (Decr.) in Accum. OCI and Oth. Eq. Adjs. (769) (89,452) 65,993 - - - - - - - - - - Incr. (Decr.) in Treasury Stock (36,616) (24,528) - - - - - - - - - - (3,797) Dividends (Common) (38,142) (40,906) (203,465) (148,775) (209,631) (220,890) (262,137) (245,148) (249,057) (256,404) (267,585) (279,173) (329,533) NET CF FROM FINANCING 205,508 (149,718) (119,037) (125,038) (167,633) (173,722) (209,305) (207,628) (209,830) (215,386) (224,689) (234,306) (261,501) NET CHANGE IN CASH 23,185 (3,159) 5,545 6,099 6,709 5,166 5,528 5,915 4,521 4,747 4,984 5,233 5,495

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

FIRM NAME: Wella AG FORECAST RATIO ANALYSIS BASED ON €300M SYNERGIES GENERATEDForecasts for Year +11 and beyond:

Long-Run Growth Rate Assumption 5.0%

Actuals Forecasts2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11

FORECAST VALIDITY CHECK DATA:GROWTH

Sales Growth Rates: 19.1% 12.9% 6.4% 4.0% 4.0% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Net Income Growth Rates: 25.8% 22.5% 15.7% 42.9% 9.8% 13.5% 16.4% 16.0% -10.1% 5.0% 5.0% 5.0% 5.0% 5.0%Total Asset Growth Rates 7.8% 18.4% 2.1% 4.8% 5.2% 4.5% 5.6% 5.8% 4.3% 4.6% 4.6% 4.7% 4.7% 5.0%

RETURN ON ASSETS: Profit Margin for ROA 4.7% 4.9% 5.5% 6.8% 7.1% 7.5% 7.9% 8.3% 7.1% 7.1% 7.1% 7.1% 7.1% 7.1%

x Asset Turnover 1.4 1.4 1.4 1.4 1.4 1.4 1.5 1.6 1.6 1.6 1.6 1.6 1.6 1.6= Return on Assets 6.6% 6.9% 7.5% 9.4% 9.8% 10.8% 11.9% 12.9% 11.2% 11.2% 11.3% 11.3% 11.3% 11.3%

RETURN ON COMMON EQUITY: Profit Margin for ROCE 3.6% 3.9% 4.2% 5.8% 6.1% 6.3% 6.7% 7.1% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

x Asset Turnover 1.4 1.4 1.4 1.4 1.4 1.4 1.5 1.6 1.6 1.6 1.6 1.6 1.6 1.6x Capital Structure Leverage 3.7 3.8 4.0 4.0 3.8 3.6 3.5 3.4 3.3 3.2 3.2 3.1 3.0 2.9= Return on Common Equity 18.7% 20.8% 23.3% 32.0% 31.6% 33.1% 35.7% 37.8% 31.5% 30.8% 30.1% 29.3% 28.6% 28.3%

OPERATING PERFORMANCE:Gross Margin / Sales 65.9% 66.1% 65.9% 67.9% 68.5% 69.2% 69.8% 70.4% 68.5% 68.5% 68.5% 68.5% 68.5% 68.5%

Operating Profit Before Taxes / Revenues 8.0% 8.2% 8.9% 11.2% 11.8% 12.5% 13.1% 13.7% 11.8% 11.8% 11.8% 11.8% 11.8% 11.8%

ASSET TURNOVER:Sales / Avg. Accounts Receivable 4.8 5.1 5.0 4.8 4.8 5.1 5.4 5.8 5.9 6.0 6.0 6.1 6.1 6.2

COGS / Average Inventory 2.6 2.4 2.4 2.4 2.6 2.9 3.2 3.4 3.7 3.9 4.0 4.2 4.4 4.5Sales / Average Fixed Assets 6.9 7.1 7.5 3.3 2.1 2.3 2.4 2.6 2.6 2.6 2.6 2.6 2.6 2.6

LIQUIDITY:Current Ratio 2.1 1.7 1.5 1.5 1.4 1.4 1.3 1.3 1.3 1.3 1.3 1.3 1.4 1.4

Quick Ratio 1.1 0.9 0.9 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8

SOLVENCY:Total Liabilities / Total Assets 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7Total Liabilities / Total Equity 2.5 2.8 3.0 2.7 2.6 2.5 2.4 2.3 2.2 2.1 2.0 2.0 1.9 1.9

Interest Coverage Ratio 4.6 5.2 4.4 7.0 7.0 6.3 6.6 6.9 6.6 6.6 6.6 6.6 6.6 6.6

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

WELLA VALUATIONS BASED ON €300M SYNERGY ESTIMATESFSAP OUTPUT: VALUATIONFIRM NAME: Wella AG based on €300M synergy estimated by P&G in the first 3 years

Continuing1 2 3 4 5 6 7 8 9 10 Value

RESIDUAL INCOME VALUATION 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Comprehensive Income Available for Common Shareholders 204,369 224,469 254,882 296,786 344,160 309,340 324,807 341,047 358,100 376,005 394,805 Book Value of Common Shareholders' Equity (at t-1) 605,638 672,535 748,230 793,481 869,377 951,399 1,015,591 1,091,341 1,175,985 1,266,500 1,363,332 Required Earnings 69,975 77,705 86,450 91,679 100,448 109,925 117,341 126,094 135,873 146,331 157,519 Residual Income 134,393 146,764 168,432 205,107 243,712 199,415 207,466 214,954 222,227 229,673 237,286

Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Residual Income 120,474 117,937 121,330 132,446 141,075 103,478 96,505 89,632 83,067 76,959 Sum of PV Residual Income 1,082,904 PV of Continuing Value 1,213,148 Total 2,296,052 Add: Beginning Book Value of Equity 605,638 PV of Equity 2,901,690 Adjust to midyear discounting 1.06 Total PV of Equity 3,069,320 Shares Outstanding 44,136 Estimated Value per Share 69.54

Current share price 58 Percent difference 20%(Value/price)-1: positive number indicates underpricing.

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG based on €300M synergy estimated by P&G in the first 3 years

ContinuingRESIDUAL INCOME VALUATION 1 2 3 4 5 6 7 8 9 10 ValueMarket-to-Book Approach 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Comprehensive Income Available for Common Shareholders 204,369 224,469 254,882 296,786 344,160 309,340 324,807 341,047 358,100 376,005 394,805 Book Value of Common Shareholders' Equity (at t-1) 605,638 672,535 748,230 793,481 869,377 951,399 1,015,591 1,091,341 1,175,985 1,266,500 1,363,332 Implied ROCE 0.34 0.33 0.34 0.37 0.40 0.33 0.32 0.31 0.30 0.30 0.29 Residual ROCE 0.22 0.22 0.23 0.26 0.28 0.21 0.20 0.20 0.19 0.18 0.17 Cumulative growth factor as of t-1 1.00 1.11 1.24 1.31 1.44 1.57 1.68 1.80 1.94 2.09 2.25 Residual ROCE times growth 0.22 0.24 0.28 0.34 0.40 0.33 0.34 0.35 0.37 0.38 0.39 Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Residual ROCE times growth 0.20 0.19 0.20 0.22 0.23 0.17 0.16 0.15 0.14 0.13 Sum of PV Residual ROCE times growth 1.79 PV of Continuing Value 2.00 Total PV Residual ROCE 3.79 Add one for book value of equity at t-1 1.00 Sum 4.79 Adjust to mid-year discounting 1.06 Implied Market-to-Book Ratio 5.07 Times Beginning Book Value of Equity 605,638 Total PV of Equity 3,069,320 Shares Outstanding 44,136 Estimated Value per Share 69.54

Current share price 57.75 Percent difference 20%Sensitivity analysis for the market-to-book approach should be identical to that of the residual income approach.

FSAP OUTPUT: VALUATIONFIRM NAME: Wella AG based on €300M synergy estimated by P&G in the first 3 years

Continuing1 2 3 4 5 6 7 8 9 10 Value

DIVIDENDS BASED VALUATION 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year +11 Dividends Paid to Common Shareholders 203,465 148,775 209,631 220,890 262,137 245,148 249,057 256,404 267,585 279,173 Less: Common Stock Issues - - - - - - - - - - Plus: Common Stock Repurchases - - - - - - - - - - All-Inclusive Dividends to Common Equity 203,465 148,775 209,631 220,890 262,137 245,148 249,057 256,404 267,585 279,173 326,638 Present Value Factors 0.90 0.80 0.72 0.65 0.58 0.52 0.47 0.42 0.37 0.34 PV Net Dividends 182,391 119,552 151,008 142,638 151,741 127,209 115,852 106,916 100,022 93,545 Sum of PV Net Dividends 1,290,875 PV of Continuing Value 1,669,973 Total 2,960,848 Adjust to midyear discounting 1.06 Total PV Dividends 3,131,896 Shares Outstanding 44,136 Estimated Value per Share 70.96

Current share price 57.75 Percent difference 23%(Value/price)-1: positive number indicates underpricing.

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

Bibliography

R. F. Bruner, J. R. Perella, Applied Mergers and Acquisitions; Wiley Finance; Hardcover 2004.

Clyde P. Stickney, Paul Brown, James M. Wahlen; Financial Reporting and Statement Analysis : A Strategic Perspective, South-Western College Publications; Fifth Edition; 2003.

Pieter Krahnen, Reinhard H. Schmidt; The German financial system; Oxford University Press, New York, 2004.

Hunt, Peter; Structuring mergers & acquisitions : a guide to creating shareholder value; Aspen Publications; New York 2003. J. Fred Weston, Samuel C. Weaver; Mergers and acquisitions; McGraw-Hill, New York; 2001.

Patrick A. Gaughan; Mergers, acquisitions, and corporate restructurings; John Wiley & Sons, New York, 1996.

Financial Times (London, England) November 20, 2002; Wella denies reports of Henkel offer; By UTA HARNISCHFEGER and KLAUS-MAX SMOLKA

Financial Times; March 11, 2003 WELLA SHARES RISE AS HENKEL BUYS 6.9% STAKE

PR Newswire; March 18, 2003, Procter & Gamble Acquires Controlling Interest in Wella Will Now Make Tender Offer for Remaining Shares Financial Times March 19, 2003 Wednesday; P&G seeks to reassure Wella chiefs By: NEIL BUCKLEY and UTA HARNISCHFEGER.

The Deal, April 29, 2003 P&G raises its Wella bid; by: Andrew Bulkeley in Berlin

Mergers and Acquisitions Journal; May 1, 2003; P&G Will Use Its Wella Acquisition To Accelerate Hair Product Innovation; By Joan Harrison.

The Deal; May 12, 2003; Wella gives halfhearted nod to P&G; By Andrew Bulkeley

PR Newswire; May 30, 2003, Statement on Tender Offer for Preference Shares in Wella AG ('Wella') by Procter & Gamble Germany Management GmbH ('P&G')

PR Newswire; June 26, 2003, Procter & Gamble Announces Wella Tender Offer Final Results

PR Newswire; July 9, 2003, Statement on Tender Offer for Preference Shares in Wella AG ('Wella') by Procter & Gamble Germany Management GmbH, a Wholly Owned Subsidiary of The Procter & Gamble Company Inc. ('P&G')

PR Newswire; July 30, 2003, European Union Antitrust Authorities Clear P&G's Acquisition of Wella

PR Newswire September 2, 2003, Procter & Gamble Closes Wella Transaction; P&G and Wella to Evaluate Collaboration Opportunities For Long-Term Business Growth

Carlos U. FloresMergers & Acquisitions

December 13th, 2003

PR Newswire September 19, 2003, Statement Issued by Close Brothers: Harvard Professor Sam Hayes Critical of P&G Treatment of Wella Minority Shareholders

The Deal, L.L.C. Wella minority digs in; By: Andrew Bulkeley in Berlin

PR Newswire; April 26, 2004, Wella AG and Procter & Gamble Enter into a Domination and Profit Transfer Agreement

PR Newswire European; May 7, 2004; Wella Appoints Procter & Gamble as Purchasing Agent

PR Newswire; June 11, 2004, Domination and Profit Transfer Agreement Between Procter & Gamble and Wella AG Effective

Associated Press Worldstream; Procter & Gamble names Wella chief Gurtler as group president

AFX.COM; July 28, 2004 P&G, Wella to cut 1,500 jobs as they consolidate supply ops, close some plants

Richmond Times Dispatch (Virginia); August 3, 2004; PROCTER & GAMBLE CO.

DOW JONES; October 27, 2004 Wella slumps to loss in short FY on restructuring charges in Consumer division

Carlos U. FloresMergers & Acquisitions

December 13th, 2003