UN Unilever NV

Unilever PLC's (UL, ULVR.LN) planned acquisition of Alberto Culver Co. (ACV) will spur more intense competition in the hair- and skin-care sector, and leaves the door open for other bids for the smaller company.

The deal is set to vault consumer giant Unilever to a more powerful position in the U.S. beauty industry, giving it brands it can grow globally and helping it better compete in the higher margin personal-care industry.

Alberto's shares closed at $37.64 Monday, a notch above the agreed deal price of $37.50, suggesting investors weren't completely ruling out a counter offer to top Unilever's $3.7 billion price.

"We would have wanted it to be a little more. Maybe it will--who knows?" said Glenn Shaw, an analyst at Atlanta Capital, which holds shares of Alberto Culver. The maker of hair-care products has for years been seen as an acquisition target. Shaw said Monday's deal was a "decent" one, but he would have expected a valuation of $4 billion or more since Alberto is growing its margins, and the deal will add to Unilever's earnings.

Still, some of large players in the beauty industry could face antitrust problems even if they were interested in nabbing the maker of Alberto VO5 shampoo, TRESemme hair care products and St. Ives lotions.

"I would not say the acquisition is particularly expensive. So someone could come in at a higher price point and make it work for them," said Sanford Bernstein's Ali Dibadj. "The question is there aren't [that] many candidates out there. L'Oreal (OR.FR) and Procter & Gamble (PG), who sound like good acquirers, would probably face antitrust issues." Unilever didn't comment, and an Alberto spokesman said the company is "not soliciting bids," but as a public company would have to respond if one is made.

Caris & Co. analyst Linda Bolton Weiser says Alberto Culver could be of interest to such multinationals as Kao Corp. (KCRPY) and Henkel AG (HENKY) and doesn't rule out L'Oreal being able to surmount antitrust hurdles. Still, she isn't counting on a bid and says she doesn't expect any counteroffer to top Unilever's offer by more than 10%. Representatives at Kao couldn't be reached, Henkel didn't immediately comment, and L'Oreal declined to comment.

A P&G spokesman said the company is focused on growing its retail hair-care business organically, and its current portfolio of hair brands meets all its consumers' needs. Even if the company had considered such a deal, it is unlikely regulators in the U.S. would have approved it given P&G's leading market share position in hair care, he said.

The Unilever deal has a $125 million break-up fee, and analysts said the current deal likely has the support of the founding Lavin family. Stifel Nicolaus estimated that the family controls about 14% of Alberto Culver's shares outstanding.

The Unilever deal would come at a time when it has been engaged in big battles for market share with P&G around the world in sectors ranging from detergent to shampoo. The latest deal would give Unilever a 23% share of the U.S. hair-care market compared with the current 11%, making it a more formidable player against P&G, which has a 29% share, according to analysis by Stifel Nicolaus. The move also would give Unilever an edge over L'Oreal, which currently has an estimated 15% share of the U.S. hair-care industry.

Most household products companies, fighting a consumer spending slump in the developed world, are trying to use their scale to give them an edge. A larger set of brands can give companies more clout, resulting in better shelf space with retailers.

Unilever would also have the opportunity to grow Alberto's presence in Europe and elsewhere in the world. While Alberto Culver is viewed as having done a good job managing its brands, Unilever's deeper pockets would allow it to spend more on marketing, promotions and even distribution expansion. Unilever is known for a strong distribution network, which even reaches some of the smallest stores in developing markets and so already has the network needed to grow brands. The Anglo-Dutch giant said Alberto Culver would complement its existing brands like Dove and Sunsilk in hair care and Pond's and Vaseline in skin care.

"It complements our [brands] very well," Dave Lewis, president, Americas for Unilever, said in an interview. "We have the opportunity to look at using the Unilever infrastructure and capabilities to take these brands around the world."

-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200; anjali.cordeiro@dowjones.com

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