Wella Shareholders Demand EGM Over Corporate Governance Concerns FRANKFURT, November 10 /PRNewswire/ -- - Shareholder group calls for vote of No Confidence in Wella's CEO, and for an investigation into possible breaches of fiduciary duty Five of the minority shareholders in Wella AG (Frankfurt: WEL), the Darmstadt-based hair-care group in which Cincinnatti-based Procter & Gamble (NYSE: PG) acquired a controlling stake in September, have written to the Management Board of Wella to demand an Extraordinary General Meeting "without undue delay". In a letter addressed to Dr Heiner Guertler, Wella's chief executive officer, the shareholders express concern at the way in which the company has already been subject to various initiatives launched by Procter & Gamble as the new majority owner. These initiatives appear in their view to be aimed at activities that would be unlawful under Germany's Stock Corporation Law, unless and until special provisions are made for the protection of all those minority shareholders (accounting in aggregate for around 20% of Wella's equity) who chose to reject Procter & Gamble's bid for Wella earlier this year. The letter is accompanied by a proposed agenda, tabling three resolutions: - a vote of no confidence in the chief executive officer, Dr Guertler; - an instruction to the Management Board to establish the appropriate legal basis for Wella's relationship with Procter & Gamble as its controlling shareholder, by entering into a domination or profit- sharing agreement with Procter & Gamble and paying appropriate compensation to minority shareholders; and - an appointment of Special Auditors to investigate alleged breaches of fiduciary duty by the Supervisory and Management Boards of Wella, during the process of Procter & Gamble's Tender Offer and subsequent to it. The five signatories to the letter - Arnhold and S. Bleichroeder, Elliott Associates, Paulson & Co. Inc., Perry Capital and Stark Investments - are all international fund management companies, and their holdings together represent approximately 9.0% of Wella's equity, worth approximately EUR415m at today's market price. Simon Waxley of Elliott Associates, one of the signatories of today's letter, said: "An Extraordinary General Meeting will allow us to question Wella's senior management on a wide range of conflict of interest and corporate governance issues that we believe are causing acute concern to all the company's minority shareholders". Trudbert Merkel, a senior portfolio manager at Deka Investment, one of Germany's biggest institutional investors, which is supportive of the shareholder group's initiative, added: "The EUR1.5 billion offer made for the 23.5m Preferred shares was unfair and simply not acceptable to Deka's investors. The demand by minority shareholders for an Extraordinary General Meeting is aimed at protecting our investment in the company. We want to make sure that our management acts in the interest of all Wella's shareholders, while of course ensuring that the company's assets and intellectual property are not extracted for the sole benefit of the controlling majority shareholder." Stephen Aulsebrook, co-chairman of the investment bank Close Brothers which is advising a broad group of the minority shareholders, concluded: "We are dismayed at the failure of Wella's Supervisory and Management Boards to demonstrate to us that they will live up to their obligations to continue acting on behalf of all the company's shareholders. They have refused to have any constructive dialogue with minority shareholders holding approximately US$ 1 billion worth of Wella's shares, or to recognise the complex situation created by the rejection of Procter & Gamble's tender offer by the majority of Wella's Preference shareholders. Consequently, there has been no choice but to table these resolutions and to seek to convene a special shareholders' meeting." NOTES TO EDITORS 1. P&G acquired control of Wella AG by purchasing the founding family members' 34.2m Ordinary shares, representing 50.7% of the equity and 77.6% of the votes. The price paid for each Ordinary share was EUR92.25, making the deal worth EUR3.2 billion to the family. P&G's subsequent offer of EUR92.25 for the remaining Ordinary shares and EUR65 for the Preferred shares was rejected by holders of 56.5% of the Preferred shares, who now comprise the Minority Interest with 20% of Wella's total equity. The offer for all of the 23.3m Preferred shares, representing 35% of the equity, was worth a total of EUR1.5 billion. 2. Germany's Stock Corporation Law requires that any majority shareholder in a company must enter into an agreement with its board in order to protect minority shareholders and creditors if the majority shareholder intends to treat the company as a wholly-owned subsidiary. Any such "Domination Agreement" that requires shareholders' approval obligates the majority shareholder to provide full financial compensation to the minority shareholders for the loss of their company's independence. Professor Dr Hans-Joachim Mertens, one of Germany's leading commentators on the Stock Corporation Law, has confirmed in a legal opinion that the envisaged general integration of Wella's main functions and business areas, in particular R&D, would be unlawful without a prior Domination Agreement. 3. Under German Law, an Extraordinary General Meeting can be requested by shareholders holding 5% of a company's equity. 4. Wella AG's Preferred shares are traded on the Frankfurt Stock Exchange, where they closed on Friday 7th November 2003 at EUR68. Close Brothers Corporate Finance Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Wella Shareholder Committee and no one else in connection with this matter and will not be responsible to anyone other than the Wella Shareholder Committee for providing the protections afforded to customers of Close Brothers Corporate Finance Limited nor for providing advice in relation to this matter. This announcement does not constitute and should not be interpreted as a proxy solicitation, nor as a solicitation to buy or sell securities in Wella or P&G (or any of their respective subsidiaries or ultimate parent companies). The purpose of this announcement is merely to communicate to the investor community the dissatisfaction of the Wella Shareholder Committee with the terms of the P&G offer for the Wella Preference shares which is now closed for acceptance and the subsequent conduct of P&G and Wella. This announcement is not an invitation or recommendation to accept or not to accept the P&G Offer or take any other action with regard to the securities of Wella or P&G. Furthermore, each member of the Wella Shareholder Committee reserves the right in the final instance to act in its own best interests and in the best interests of its fiduciaries with respect to their holdings of Wella Preference shares. FOR FURTHER INFORMATION: Stephen Aulsebrook, Close Brothers Corporate Finance, +44 (0)7768 143 243 / +44 (0)207 655 3141, Duncan Campbell-Smith, The Maitland Consultancy, +44 (0)7774 250 811/ +44 (0)207 379 5151, Brian Faw, Abernathy MacGregor Group, +1 917 860 8372 / +1 212 (371) 5999

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