Acquisition Speculation

Nivea Maker Under Pressure to Grow

Stefan Heidenreich-CEO-Beiersdorf_dpa
Publicity-shy but effective: Beiersdorf CEO Stefan Heidenreich.
  • Why it matters

    Why it matters

    Beiersdorf is financially well-positioned but hasn’t increased dividends in years, and some investors want to see the money put to good use.

  • Facts


    • Beiersdorf, which ranks among the 30 leading German blue-chip DAX firms, could fork out €8 billion for the purchase of a company without going into debt.
    • Beiersdorf’s Nivea is the market leader in personal care products in 46 countries.
    • The firm’s other brands include Labello lip care products, 8×4 deodorants, Eucerin skin care products and Tesa tape.
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Stefan Heidenreich, the chief executive of Beiersdorf, the Hamburg-based group best known for its Nivea range of personal care products, likes to keep a low profile. He doesn’t give interviews, doesn’t talk to analysts and avoids public engagements whenever he can. And when he can’t, for example when it’s time for an annual general meeting or an annual results news conference, he keeps his speeches brief. With his quiet style, he has led the ailing giant back to growth in the last four years, exercising a mixture of caution and aggression, taking risks at times but always keeping the company’s tradition in mind.

Now he’s under pressure from some investors to take the next step, to make a major acquisition to expand Beiersdorf, which is still a minnow compared with competitors like L’Oréal, Procter & Gamble, Coty and Unilever. Some Beiersdorf investors are piling on the pressure.

“We’re just slowly starting to fish.”

Stefan Heidenreich, CEO, Beiersdorf

“A larger takeover would really make sense right now and would certainly also be seen as positive by investors,” said Peter Steiner, consumer product analyst at Bankhaus Lampe, a private bank in Düsseldorf.

Beiersdorf is financially well-off but hasn’t increased dividends in years. This would be easier for investors to understand if the money was being put to good use. Industry experts see takeover targets in the market for organic cosmetics as well as in the Hamburg-based group’s latest field of endeavor: the shaving products business.

A number of things suggest that Beiersdorf, after entering into the business with interchangeable shaving blades for women (Nivea Protect & Shave), now wants to boost its earnings in the men’s market.

The market for razors is dominated by the U.S.-based groups  Procter & Gamble, maker of the Gillette brand, and Edgewell, which makes Wilkinson razors. New opportunities for growth might be found in combination with Nivea products, like shaving cream and aftershave and pre-shave lotions — particularly in men’s products.

For that reason, there’s speculation in the industry that Beiersdorf might swallow up Edgewell. The No. 2 in the world market would not only provide Beiersdorf with good razor blades, but also give it access to other markets. For example, Edgewell also produces sunscreen lotions and brand-name articles such as Carefree hygiene products and o.b. tampons.

Industry insiders say such a takeover makes obvious sense.

Edgewell, based in Missouri, generated about $2.4 billion in sales last year and currently has a market value of around $5 billion. The company’s shareholders are primarily funds and investment companies. For that reason, Edgewell is already considered a takeover candidate in U.S. financial circles.


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“They are literally waiting for an offer to come,” an investment banker said. A spokeswoman for Beiersdorf declined to comment on speculation of a takeover.

Mr. Heidenreich certainly has the money for an acquisition. Beiersdorf has close to 10 percent of its own stock stashed away. The group could use it for a takeover. Together with a capital increase, the group, whose current market value is €20 billion ($22.5 billion), could raise around €8 billion without having to go into debt. Its equity ratio is at a record high of 61 percent. Beiersdorf has virtually no debt and more than €3 b illion in cash.

One obstacle to a big deal, however, could be multi-billionaire Michael Herz, a major shareholder. He wants any takeover candidates to be close to the group’s core business, namely skin and face care. That reduces the list of targets. Moreover, sellers in the beauty industry are demanding “crazy Prices,” one investment banker said. That’s partly because competitors like Henkel, L’Oréal and Unilever are also on the lookout for acquisitions.

Mr. Heidenreich isn’t giving much away about his intentions. “We’re just slowly starting to fish,” he said recently.

When he became chief executive, the Nivea brand had just turned 100. But there was little reason to celebrate. The long-established brand was losing market share. His predecessor, Thomas Quaas, had over-extended the brand to include lipstick, makeup and nail polish. Sales never took off.

The only thing left for Mr. Quaas to do was an about-face. He reduced the number of employees by 1,000 to 17,500 and opted for a “less-is-more” strategy. Mr. Heidenreich took over the implementation of the concept, removing the lavishly-presented cosmetic line Nivea Beauté and thinning Nivea’s product range by 20 percent.

In addition, Mr. Heidenreich picked up the pieces in China where his predecessor had financially overstretched the company with a €270-million takeover of hair care specialist C-Bons Hair Care. The acquisition proved to be badly in need of restructuring. Beiersdorf was forced to inject a lot of extra money. At least the group is now no longer losing money in Asia.

“Nivea is in brilliant shape,” said Mr. Steiner, the Bankhaus Lampe Analyst. “In my view, the brand is stronger than ever before.”

Since 2011, the operating return on sales has surged from 11.5 percent to last year’s record of 14.4 percent. That’s almost to the same level as its major German rival Henkel, which makes the Schwarzkopf brand. Beiersdorf’s market value has almost doubled under Mr. Heidenreich’s leadership.

“Nivea is in brilliant shape. In my view, the brand is stronger than ever before”

Peter Steiner, Consumer product analyst at Bankhaus Lampe

The company has “achieved a record degree of stability and resilience,” Mr. Heidenreich said a few weeks ago at the annual general meeting. “That enables us to be in a position to be economically successful even under difficult conditions.”

Mr. Heidenreich still must prove that he can do that — with or without a takeover.  Conditions are getting more difficult for Beiersdorf,  primarily due to a weaker economy and tougher competition in important markets.

Although Beiersdorf has grown strongly in Brazil, the world’s largest market for deodorant and sun lotion, the pace will slow due to the country’s economic problems.

In turn, Beiersdorf’s self-adhesive subsidiary, Tesa, is feeling the effects of the cool-down of industrial activity and weaker demand in China. Among other things, Tesa produces adhesive for cell phones there. Contracts have run out and haven’t been renewed.

And business is becoming more difficult in saturated markets like Europe. For example, Beiersdorf is no longer the only supplier of personal care products at the discount food retailer Aldi. Declines in Italy and in Switzerland brought down Beiersdorf’s sales in Western Europe by 0.3 percent. Mr. Heidenreich must reduce the dependency on sales in saturated markets like Western Europe and the United States.

Beiersdorf is also struggling in the booming business of organic cosmetics. The company is trying to become a player in this field with the former East German brand, Florena. About two years ago, Mr. Heidenreich had repositioned the brand Beiersdorf acquired in 2002 and has since been focusing on organic ingredients, together with a selection of vegan products. So far it hasn’t boosted earnings. On the contrary, according to market researchers, Beiersdorf suffered losses of close to 17 percent with Florena in the important market for facial care in 2015 and barely made €11 million in sales.

Mr. Heidenreich has shown from the start that he can do more than just come up with quick results through uncompromising cost-cutting. He has secured the trust of major shareholder Mr. Herz, who has extended Mr. Heidenreich’s contract until 2019.

Mr. Herz and his brother, Wolfgang, own 51 percent of Beiersdorf and all the shares of the Tchibo coffee company. The brothers have parked their shares in the companies in Maxingvest AG. In the coming weeks, Maxingvest is to be converted into a corporate partnership limited by shares. This will prevent Beiersdorf’s seizure by outside parties.

This increases planning security for Mr. Heidenreich. Now he can relax and watch the European soccer championship in peace — and hope that his most important Nivea brand ambassador, German national team coach, Joachim Löw, and his team score a lot of goals.


This article originally appeared in the business weekly WirtschaftsWoche. To contact the author:

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