Jousting for the Top Brands

By Charles P. Alexander

What's in a name? If the name has a familiar ring to it, like Jell-O and Oreo or NyQuil and Clearasil, it can be worth millions of dollars. Companies that sell household products with well-known brand names have become the hottest targets in the latest round of merger wars. Last week two big packaged-goods firms--Richardson-Vicks and Revlon--escaped hostile takeovers, but only by rushing into the arms of other suitors.

Richardson-Vicks, which sells such popular products as NyQuil cough syrup and Clearasil acne cream, agreed to sell out to Procter & Gamble for $1.24 billion and thus avoid a bid from Unilever. Revlon, which markets items ranging from Charlie perfume to Tums antacid tablets, eluded Pantry Pride by accepting a buy-out offer of about $1.7 billion from Forstmann Little. If the deals go through, Richardson-Vicks and Revlon will join General Foods (Jell-O, Maxwell House coffee) and Nabisco (Oreo cookies, Ritz crackers) on the list of consumer-goods titans being taken over this year.

For Richardson-Vicks, based in Wilton, Conn., the trouble began last month, when its stockholders received a $54-a-share offer from Unilever, the British- Dutch household-products giant. Prior to the bid, Richardson-Vicks had been trading for about $40 a share. Nonetheless, its executives spurned the offer, thinking they could get even more for the company and fearing Unilever's reputation for trimming the management ranks of firms it acquires. Unilever upped its bid to $60 a share, but Richardson-Vicks still put out a plea for a "white knight" to make a friendly merger bid. Procter & Gamble, the Cincinnati-based detergent and disposable-diaper king, and Pfizer, a New York pharmaceutical firm, rode to the rescue with identical $69-a-share offers. P & G reportedly won the deal because its lawyers got the paperwork done faster.

For more than a month, meanwhile, Revlon, a star of the cosmetics industry, has been fighting off the advances of Pantry Pride, a Fort Lauderdale-based retail chain whose stores are mostly in the Southeast. Pantry Pride initially offered $47.50 a share and eventually $53, but Revlon Chairman Michel Bergerac landed a $56-a-share bid, for a total of $1.7 billion, from Forstmann Little, a New York investment firm.

That complex merger calls for Forstmann to sell Revlon's beauty-products business to Adler & Shaykin, another New York investment firm, for about $900 million. Forstmann will spin off several other Revlon units to New York-based American Home Products for an estimated $350 million. The transactions will leave Forstmann with the rest of Revlon's health-care business, including prescription drugs and contact lenses.

Consumer-products companies have topped the takeover hit list since last year, when Nestle bought Carnation for $3 billion. Since then, R.J. Reynolds has paid $4.9 billion for Nabisco, and two weeks ago Philip Morris won General Foods for $5.7 billion. Analysts say that companies are eager to buy established brand names because developing and promoting new products have become increasingly risky. Even Procter & Gamble has been disappointed with sales of its new Citrus Hill orange juice and Duncan Hines cookies.

The shopping spree for consumer-products firms may be only beginning. Investors are already driving up the stock prices of a host of potential targets, including General Mills, Pillsbury and Quaker Oats. Speculation now centers on Beatrice, the Chicago-based producer of Tropicana orange juice and La Choy Chinese food. Beatrice stock jumped 3 1/8 a share last week, to close at 39 1/4. One reason: Unilever is rumored to be eyeing Beatrice after seeing Richardson-Vicks slip away.

With reporting by Jeanne McDowell/New York