Dep

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By DANIEL TAUB

Staff Reporter

DEP Corp., the debt-ridden Rancho Dominguez-based company that popularized hairstyling gel, is expected this month to be taken over by a German chemical conglomerate a move that will give Dusseldorf-based Henkel KGaA an inroad into the U.S. cosmetics market.

“We will continue with many of our own brands and have many resources to advertise and promote them,” said DEP President and CEO Robert Berglass. “In addition to that, DEP, which has limited distribution in 40 countries throughout the world, will have the support of Henkel, as a subsidiary, to help grow the international part of our business.”

Henkel, which has more than 330 subsidiary companies and makes everything from adhesives to household detergents, has made a cash tender offer to purchase all of DEP’s 6.9 million shares of stock at $5.25 a share, and will assume the company’s $53 million of debt. The purchase is valued at about $93 million.

Among DEP’s brands to be acquired are Topol smoker’s toothpaste, Lavoris mouthwash and L.A. Looks and Dep hairstyling gels.

DEP will be run as a division of Henkel under the name Schwarzkopf & DEP Inc. Henkel already sells a variety of beauty products under the Schwarzkopf name worldwide, but has limited distribution in the United States. It plans to use the new subsidiary to increase its U.S. distribution of Schwarzkopf products.

Berglass, whose family controls about a third of DEP’s shares, will be president and CEO of the division. DEP has about 300 employees locally and produces about 65 million units of product a year. Of those, about 90 percent are produced at DEP’s Rancho Dominguez factory.

Gary Shemano, president of the San Francisco-based Shemano Group, an institutional investment firm with stock in DEP, said the purchase makes sense given DEP’s need to get out of debt, and Henkel’s desire to capture a larger share of the beauty-supplies market.

DEP, which was founded in 1956 and went public in 1983, has been saddled with debt ever since its highly leveraged purchase of two brands of shampoo, Agree and Halsa, from S.C. Johnson & Son Inc.

The two brands failed to perform, and DEP filed suit against S.C. Johnson, claiming that the company wrongfully altered marketing and sales practices of the two brands prior to the close of their sale in August 1993. S.C. Johnson ended up settling out of court with DEP for $5.3 million.

DEP filed for Chapter 11 bankruptcy protection in April 1996 in order to reorganize. The company emerged from bankruptcy seven months later, and has been profitable every quarter since then. But its debt-equity ratio was considered to be high and limited DEP’s ability to advertise and market its products.

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