Henkel Fails to Strike a Pose

Good luck with that ambitious revenue target.

Look around, everywhere you turn is heartache...

That opening verse of Madonna's "Vogue" may hit home for Henkel, the German consumer-products giant, right about now. On Thursday morning, its American rival Johnson & Johnson announced a $3.3 billion takeover of Vogue International, the owner of popular hair-care brands OGX and FX, which Henkel also had been scoping out. It's yet another missed opportunity for Henkel, as its new CEO works toward an ambitious 2016 revenue target -- 20 billion euros ($22.4 billion) -- that his predecessor already conceded is a long shot.

Out of Reach?

Henkel's goal has been to reach 20 billion euros of annual revenue by 2016, a more than 10 percent boost from last year. Analysts don't seem to have faith Henkel can do it -- at least not without an acquisition.

Source: Bloomberg

It seems the only way Henkel can meet its goal is with an acquisition, yet some of its best options have landed elsewhere. The $48 billion company was also a contender for assets Procter & Gamble put up for sale last year, which included hair-care lines Wella (one of P&G's billion-dollar brands), Sebastian Professional and Clairol Nice & Easy. Instead, Coty scooped them up

Hans Van Bylen, who previously ran Henkel's beauty-care business, took over as CEO on May 1 after Kasper Rorsted left to lead Adidas. It's quite a move for Rorsted: Shares of Adidas are on a tear, with the Euro 2016 and Copa America soccer tournaments (and potentially the Olympic Games) helping to drive sneaker and sportswear demand, while Henkel's shares have lost momentum. Rorsted's surprise departure -- which came just a few months after he said Henkel's growth goal would keep him there through next year -- and then him subsequently calling that goal a stretch were a one-two punch to Henkel. 

Lagging Behind

Since closing at a record in April 2015, Henkel's stock has fallen nearly 10 percent. It's been one of the worst performers among the leading multinational household and personal-care products companies.

Source: Bloomberg

As I wrote last month, there's another consumer-products business out there that might be worth a look from Henkel before anyone else grabs hold of it, and that's Church & Dwight. The $13 billion company makes Arm & Hammer baking soda, which it's put into a slew of products to get the most out of the brand. It also makes Trojan condoms. While Church & Dwight did recently shoot down speculation that it was in talks with any suitors, there's a lot for an acquirer such as Henkel to like (read more here). 

Back to the Vogue purchase Henkel lost out on -- it's an interesting move for J&J. The $312 billion company seems to be reaffirming its commitment to its consumer division, which is J&J's smallest revenue generator, as the rest of the pharmaceutical industry goes through a breakup phase. Other giants, such as Merck, have been divesting their consumer and over-the-counter items to focus on lucrative medicines. But J&J continues to buck the trend, choosing to hold onto its baby products, Band-Aids and Neutrogena skin care, and investors seem to be fine with that: Its stock hit a record in May. 

Going Its Own Way

While many drugmakers are selling their consumer divisions, J&J is instead bolstering its presence in that area. It's buying hair-care company Vogue International, which would have been a nice target for Henkel.

Source: Bloomberg

It's been a while since Henkel made a big acquisition. Two years ago, it paid $1.3 billion for France's Spotless Group. Companies shouldn't do deals for the sake of it, and Henkel's 20 billion-euro revenue goal could even be considered somewhat arbitrary. But with growth increasingly tough to come by for these conglomerates, it makes sense to pounce when good assets come up for sale. Henkel, come on, vogue. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Tara Lachapelle in New York at tlachapelle@bloomberg.net

    To contact the editor responsible for this story:
    Beth Williams at bewilliams@bloomberg.net

    Before it's here, it's on the Bloomberg Terminal.