P&G; to Acquire Noxell Corp. in $1.3-Billion Deal : Tax-Free Transaction Will Involve Stock Swap With Cosmetics Maker

Consumer products powerhouse Procter & Gamble Co. will acquire Noxell Corp., maker of skin-care goods and cosmetics, in a stock-swap deal valued at $1.3 billion, both companies announced Friday.

Under terms of a definitive agreement approved by the boards of both companies, P&G; will add Noxell’s Cover Girl and Clarion makeup lines and Noxzema skin cream to its already bulging portfolio of leading consumer products and foods.

The announcement sent Noxell soaring $10 to $31.25 a share in over-the-counter trading. On the New York Stock Exchange, P&G; lost $2 a share to $119.86.

Under terms of the agreement, P&G; will exchange 0.272 shares of its common stock for each of Noxell’s 40.5 million common and class B shares in a tax-free transaction. Based on the closing price for P&G;, the transaction would have a value of $32.60 per Noxell share.

Very Competitive Market

Noxell, based in Hunt Valley, Md., will be operated as a P&G; unit. The 75-year-old company has 2,200 employees and annual revenue of roughly $522 million from sales in the United States, Canada and Europe.

Analysts applauded the surprise announcement as strategically sound and said the acquisition launches P&G; into the rough-and-tumble world of women’s makeup. Although P&G; has a number of successful skin care products, including Oil of Olay, Bain de Soleil and Clearasil, it has no cosmetics lines.

“P&G; has done a lot of work in skin care technology . . . and this will add another leg to their delivery systems,” said Jay Freedman of Kidder, Peabody & Co.

He said Cover Girl is the No. 1 mass-market cosmetics line in the United States, and for that P&G; paid a premium. Freedman said the price offered for Noxell is about 15 times operating cash flow.

For its part, Noxell, which also makes Lestoil household cleaner, was attracted by P&G;’s resources for research and development. Last year P&G; spent more than $650 million on research and product development.