Second Suitor Henkel Buys Stake in Hair-Care Marketer

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CINCINNATI (AdAge.com) -- German consumer products marketer Henkel on Monday said it has bought a 6.8% stake in German hair care and fragrance products marketer Wella as rumors swirl that Procter & Gamble Co. also is preparing a bid.

Previous bid rejected
"Henkel sees this as an interesting investment given the current climate in the stock market," the company said in a statement. Henkel did not comment on whether it plans to make a rival bid to P&G's. Henkel, according to published reports, made a $5.7 billion bid for Wella last year that was rejected.

Spokespeople for P&G and Wella declined to comment.

P&G has been in talks with members

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of the three families that control the majority of Wella shares since last month, according to published reports. And the German newspaper Handelsblatt reported today that a bid from P&G is imminent.

The biggest deal for P&G
Wella's business is made up primarily of professional hair care and coloring products sold in salons and would complement P&G's $5 billion acquisition of Clairol in 2001. It would also add to P&G's relatively small fragrance business. If completed, the Wella deal would be the largest in P&G's history.

For Henkel, whose brands include Persil laundry detergent, Duck brand duct tape and Fa personal care products, the deal would vastly expand the relative size of its personal care business, taking the company in a direction rivals P&G and Unilever began long ago. Personal care has become increasingly attractive to the old-line soap marketers in recent years because the businesses have generally higher growth rates and margins than other areas of package goods.

'Everybody wants beauty'
"It really does appear Henkel is serious about Wella," said Banc of America Securities analyst Bill Steele. "Everybody wants beauty. Beauty is the mantra now."

P&G executives, on the other hand, have stressed they don't intend to be drawn into a bidding war for acquisitions. But Mr. Steele said Wella, with 60% of its $3.4 billion in annual sales in Europe, would give P&G scale in European beauty care that might be difficult to get elsewhere.

With $5 billion in cash on hand, P&G has nearly enough to buy Wella without much financing. European analysts speculated in published reports Henkel may sell its roughly 30% stake in Clorox Co. to help finance a Wella deal.

Selling Clorox?
Rumors that Henkel may be interested in selling its Clorox stake have circulated in recent years, as Henkel's interest in expanding its presence in the U.S. household products market appeared to cool following the unwinding of its joint venture with Dial Corp. in 2001. But Henkel executives have said publicly they're interested in Clorox as a long-term investment -- and it's one that has paid strong double-digit returns since 1981.

Ironically, Henkel's involvement in Clorox in turn makes it a partner with P&G, which became 10% owner of Clorox's Glad brand under a deal reached last year.

A spokeswoman for Clorox declined to comment.

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