Graham Webb/Bumble And Bumble Acquisition Deal Never Definitive - Lauder

Graham Webb's lawsuit against Estee Lauder should be dismissed as the salon hair care manufacturer "never reached a definite and final contract" to acquire Bumble and bumble, Estee Lauder says in a March 21 memorandum filed in St. Paul, Minn. federal court.

In three letter agreements between Graham Webb and Bumble and bumble owners, Webb promised "'no contract shall be deemed to exist' as a result of its negotiations 'unless and until a final definitive agreement has been executed and delivered,"' Lauder claims in a March 16 memo to the court.

Although Graham Webb claims its President Rick Kornbluth made a handshake deal to acquire Bumble and bumble with the owners Nov. 17, 1999 prior to Lauder's acquisition, "since the Nov. 17 'handshake' deal could not have been 'executed and delivered,' it is not a 'final and definitive' agreement," Lauder charges.

"GWI cannot walk away from its plain and unambiguous contract," Lauder says. "No final agreement was ever executed or delivered." Estee Lauder announced it would acquire a majority stake in Bumble and bumble in June (¹ (Also see "Lauder Bumble & Bumble Purchase Extends High-End Hair Care Portfolio" - HBW Insight, 5 Jun, 2000.)).

However, in a lawsuit filed in September against Lauder, Bumble and bumble and founder Michael Gordon, Graham Webb contends Bumble and bumble already had signed an agreement with the company, and Gordon breached his contract by negotiating with Lauder (² (Also see "Graham Webb Stung By Estee Lauder's Bumble Purchase - Lawsuit" - HBW Insight, 25 Sep, 2000.)).

In a memorandum filed March 2 in opposition to Lauder's motion to dismiss, Graham Webb insists there in fact was a preceding deal with Bumble and the two firms either "do not understand the term or are attempting to mislead."

' "Close the deal' means there is a 'deal,' an agreement," Webb says. "The 'closing' is when the executory aspects of 'the deal' are performed. The reasons 'the deal' didn't 'close' is what this case is all about."

Closing the deal would have involved Webb paying $22.2 mil. in exchange for a 61% majority stake in Bumble and bumble.

In addition, the original suit claims Estee Lauder interfered with the contract and breached a confidentiality agreement with Webb with regard to a separate "private investment opportunity." Graham Webb is seeking $50 mil. in damages.

Estee Lauder had expressed interest in acquiring a stake in Graham Webb through a private placement memorandum the company was issuing to raise capital, Graham Webb claims.

However, as part of its motion to dismiss, Lauder asserts it never solicited or entered a confidentiality agreement with Graham Webb regarding the PPM.

Even after Lauder "refused to execute a confidentiality agreement and had returned the PPM, Graham Webb sent an unsolicited letter to Estee Lauder requesting Leonard Lauder review the PPM," Lauder maintains. "The letter neither included a confidentiality agreement, nor mentioned confidentiality."

Graham Webb argues it "took steps to insure the confidentiality of the PPM" and each one "was numbered and conspicuously labeled 'confidential' on its cover."

Lauder contends, however, "competition cannot be avoided simply by foisting alleged confidential information off on a competitor without requiring an advance confidentiality agreement or even a commitment to engage in negotiations."

In addition, "no confidentiality restrictions of any kind" were imposed on the Bumble and bumble owners, other than Michael Gordon, Lauder claims. Therefore, the other four stakeholders were free to discuss "at any time and with any person" information regarding the Graham Webb deal.

Graham Webb's "definite, specific and detailed contract for the sale of stock and continued employment" is enforceable under both New York and Minnesota law, the firm asserts.

However, Lauder contends Webb's claims in two states is an attempt to "dodge the issues by artfully reinterpreting" the complaint. Webb "vacillates between Minnesota and New York law to take advantage of particular precedents," the company claims.