LONDON (Reuters) - Beiersdorf, the German group best known for its Nivea brand, was until recent years the last company talked about as a takeover target.
But its new chief executive probably has only two years at most to turn around the struggling company before its key shareholder loses patience and turns to predators.
The Hamburg-based group is suffering from slow economic growth, especially with 90 percent of profits coming from a sluggish Europe, a cyclical Tesa adhesive business, which makes up 15 percent of sales, and a lack of investment behind its key blue and white brand to push it into fast-growing Asian markets.
Last week, the company hired 48-year-old Stefan Heidenreich in a sign the controlling Herz family is impatient with the speed of recovery under Thomas Quaas. If he fails the $13.6 billion group could go on the block.
"This looks like a last chance for Beiersdorf. Heidenreich will be given time but the family is clearly frustrated at the time it is taking to turn the group around," said one senior consumer goods banker in London.
If Heidenreich stumbles there is a line of suitors led by Procter & Gamble and including Unilever and Colgate-Palmolive which have shown interest, either publicly or privately, in making an offer of marriage for the group founded by Paul Beiersdorf in 1882.
The surprise change at the top will see Heidenreich, the head of private Swiss babyfood and jam maker Hero, take over in April from Quaas to lead the group's efforts to re-focus the consumer goods group behind its core Nivea brand.
Nivea is the world's largest skincare brand and accounts for 63 percent of Beiersdorf's 6.2 billion euros ($8.5 billion) in annual sales. It is seen as the jewel in the crown of a group which also makes Eucerin medical skincare products, La Prairie anti-ageing cream and Labello lip balm.
"We see Heidenreich's appointment as the last realistic chance to execute an organic turnaround at Beiersdorf. If this fails, we would expect market speculation over M&A options to intensify," said RBS analyst Iain Simpson.
Of possible suitors for Beiersdorf, the world's biggest consumer products group Procter & Gamble has been the most vocal, with Chief Executive Robert McDonald saying last year Nivea was a "terrific global brand" and he would look at buying the group if it wanted to be bought.
The U.S. maker of Gillette razors and Olay skin creams had previously looked at buying a 40 percent stake in Beiersdorf in 2003 but was blocked by the city of Hamburg, the company's pension fund as well as coffee roaster and retailer Tchibo, another Herz family investment.
Analysts have also said Anglo-Dutch group Unilever and U.S. company Colgate-Palmolive could be interested in Beiersdorf, which is valued at $13.6 billion compared to P&G at $175.6 billion, Unilever at $109.2 billion and Colgate at $43.9 billion.
"We believe Heidenreich was offered the job on the understanding that the Herz family would give him time to revive the group. That probably gives him a couple of years to really make a difference," another banker said.
LONG-TERM INVESTMENT
The Herz family investment vehicle Maxingvest has always stressed its investment, currently at 50.5 percent in Beiersdorf, is long-term. It first invested in 1974.
Last December, Beiersdorf set aside 270 million euros for a turnaround "Focus on skincare" package through to 2012 to invest in skincare and strip out unprofitable makeup and haircare lines.
It has sold its upmarket skincare brand Juvena and premium haircare brand Marlies Moller and added it would withdraw from all decorative cosmetics in its home market of Germany.
Analysts want to see Beiersdorf focus on skincare with increased investment and innovation, and continue Nivea's growth in deodorants, men's cosmetics, suncare and bath products, and particularly into emerging markets.
Heidenreich's appointment mirrors the move by German rival Henkel to bring in a young outsider in 2008. Kasper Rorsted successfully led its rejuvenation and analysts and bankers are hopeful Heidenreich can do the same.
He takes over at Beiersdorf's annual meeting on April 26 next year, after 25 years of consumer goods experience, having worked at Procter & Gamble and Reckitt Benckiser before joining Hero in 1996 and becoming chief executive in 2002.
At P&G, Heidenreich managed brands like Pampers, Ariel and Crest, then oversaw Reckitt's expansion into eastern Europe. At Hero he focused on a few core product categories. So he should be a good fit at Beiersdorf where portfolio pruning in haircare and make-up and a refocus on Nivea are needed, analysts said.
"It looks like the major shareholders have lost a bit of patience and want to speed up the turnaround of the business with a younger CEO," said Bankhaus Lampe analyst Heiko Feber.
Quaas' exit came as a shock to investors as he had worked at Beiersdorf for 33 years, and as CEO since 2005, and his contract stretched out to 2012. He had only just launched the group's latest strategy in December to reinvigorate the Nivea brand.
But analysts said Quaas, who turns 60 in February, has struggled with the under-investment and overextension of the Nivea brand and also the distraction of its acquisition of Chinese haircare player C-Bons in late 2007 and its associated costs. He will stay on the group's supervisory board after he steps down in April. ($1 = 0.733 Euros)
(Reporting by David Jones; Editing by Chris Wickham and Helen Massy-Beresford)
There are no comments yet