Henkel Fails to Strike a Pose
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.
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.
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.
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.
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