Johnson & Johnson Consumer seems to be betting on beauty.
The consumer products business unveiled Thursday that it would pay $3.3 billion to take over Vogue International, which owns hair-care brand OGX. That news comes just after J&J Consumer closed the acquisition of skin-care brand NeoStrata, last week.
“I want to bring my innovation and beauty to everyone in the world,” said Vogue founder Todd Christopher. “We accomplished that domestically, and we accomplished that in several different countries, but I think with J&J’s help we’ll be able to bring that on a global basis.”
“Our acquisition of Vogue International’s full line of leading advanced hair-care products sold in the U.S. and 38 countries will strengthen our global presence in this important category,” said J&J Consumer worldwide chairman Jorge Mesquita. “Vogue International’s commitment to quality, innovation and consumer preference complement our consumer portfolio, while also presenting attractive hair-care category growth opportunities for Johnson & Johnson.” J&J Consumer owns the Aveeno, Neutrogena and Rogaine brands. The company declined to comment further for this story. The OGX deal is expected to close in the third quarter.
The transaction will net the Carlyle Group a fourfold return, according to a source familiar with the transaction. Carlyle originally invested $400 million for a 49 percent stake in the business in 2014, The Wall Street Journal first reported. Christopher is also selling his 51 percent stake, giving J&J Consumer complete ownership of the business, though he said he intends to remain involved with the brand. Carlyle’s investment came shortly after the line changed its name from Organix to OGX, which it did after spending $6.5 million to settle a class-action suit alleging it falsely labeled products to mislead customers to believe the line was organic.
Since Carlyle’s investment, OGX has grown at north of 20 percent per year, according to Carlyle managing partner Sandra Horbach. The brand has expanded both in shelf space and product range, and has jumped from the number-eight to the number-five shampoo and conditioner brand in Nielsen rankings. J&J Consumer’s takeover is meant to propel the business further along that trajectory.
“We still think there is a lot of opportunity to grow domestically,” Horbach said. “The company has been gaining share, gaining shelf space and continues to launch innovative and exciting new products that are resonating with consumers. We also believe the international growth is just beginning, and there is a tremendous amount of white space there as well.”
Currently, international markets make up roughly a quarter of OGX’s total sales. For Vogue International, which also includes FX, Maui Moisture and Progranix, sales for 2015 were about $400 million, according to industry sources.
The shampoo generated sales of $30 million for the 52-week period ended March 20, 2016 in multiunit doors, according to IRI. That represents more than a 6 percent market share against competition from majors such as Pantene and Garnier. OGX conditioner achieved sales of $37.5 million during that same period, according to IRI. The company owns more than 8 percent of the conditioner market.
OGX is viewed as a retailer favorite because they generate higher profits than many other brands, experts said. “This brand stands out as one of the most critical value drivers at retail — both for retailers and for Vogue International itself,” said Martin Okner, managing director at SHM Corporate Navigators and chairman of the Association for Corporate Growth’s New York chapter. “It broke the $5 price ceiling that usually exists in mass shampoos,” Okner said.