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Executive Summary

PERELMAN's $4.12 BIL. OFFER FOR GILLETTE IS 2-1/4 TIMES THE PRICE that the financier paid to get into the cosmetics/toiletries business last year, but it is not enough to impress the financial market as a final bid. Gillette's stock quickly pushed above Perelman's offer of $65 cash per share and closed on Nov. 14 at $68. Revlon Chairman Ronald Perelman bought into the cosmetics/toiletries business with the hostile takeover of Revlon last autumn for $1.8 bil. Perelman eventually lowered his outlay for that deal to under $500 mil. via divestitures. Perelman's offer is valued at roughly 22 times Gillette's estimated full-year earnings. For Revlon, the original price was about six times after-tax earnings. The scope of the Revlon consolidation effort is highlighted by the fact that the company is simultaneously involved in an effort to buy the Max Factor/Halston/Almay group from International Playtex. That deal is waiting the completion of a leveraged buyout of Playtex from Beatrice. Perelman's acquisition activites have not raised antitrust issues to date. The vehicle for the Perelman/Revlon takeover is a company called Orange Acquisition Corporation, a wholly-owned subsidiary of a partnership formed by the Revlon Group and MacAndrews & Forbes (headed by Perelman). After purchasing an initial position in Gillette of 9.2 mil. shares (or 13.9% of the 63.4 mil. outstanding), Orange began a tender offer on Nov. 14; the initial deadline is Dec. 12. Drexel, Burnham Lambert is representing Perelman again. Gillette is using Morgan Stanley. Gillette's first response to the unsolicited takeover offer was to urge shareholder restraint in tendering.

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