Battle for professional hair-care market

- Last updated on GMT

Related tags: Procter & gamble, Us

L'Oréal may be seeking to acquire Alberto-Culver to ward off
competition in the US hair-care market. With the acquisitions of
Clairol in 2001 and Wella last year, Procter & Gamble has made
it clear that it is trying to usurp L'Oreal as the global leader in
hair-care products.

Alberto-Culver - in addition to making its own hair-care products - operates America's biggest distribution business to hair salons. Owning that business would give L'Oreal a greater grip on the $2.9 billion US professional market.

The acquisition would further boost L'Oreal's lead over P&G in the US. The french beauty giant already has more than double P&G's hair-care business, with 2003 sales of $663 million.

Despite Alberto-Culver posting faster earnings growth than the US personal-care industry overall, the prospects for its hair-care products - led by its Alberto V05 brand - are under increasing pressure from much larger rivals.

Culver's professional-distribution is by far its most profitable business accounting for two-thirds of its sales. The business consists of 2,000 Sally Beauty Supply stores, which sell to both professionals and the public. Culver also owns Beauty Systems Group, which distributes higher-end products from manufacturers directly to salons.

Sally and Beauty Systems not only accounts for the majority of L'Oréals US sales already, but also Procter & Gambles. If the L'Oréal acquisition was to go ahead P&G may be left with no choice but to stay with Sally because no chain could match its size.

With so much at stake, analysts believe that P&G would also be likely to make an offer for Culver. Both L'Oréal and P&G could support offers expected to be between $4.2 billion and $4.8 billion, including Culver's debt.

Alberto-Culver, L'Oréal and P&G have all declined from comment.

Related topics: Market Trends, Hair Care

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