Procter & Gamble Co. is still looking for the exit for at least parts of its massive beauty portfolio.
The consumer products giant’s chairman and chief executive officer, A.G. Lafley, steered the company on a course last year that has it cutting as many as 90 of its 160 brands. While about 35 businesses, including giant brand Duracell, have been offloaded, beauty is still hanging in the balance.
“They didn’t get the level of interest that they thought they would,” said one financial source of P&G’s efforts to sell off some of its beauty brands. “Everybody knows they’re underperforming brands, but they’ve asked a pretty rich price.”
P&G has a sprawling portfolio of brands — from the relatively small Frédéric Fekkai and Max Factor to ones with more than a billion dollars in sales, including Wella, SK-II, Olay and Pantene. During the last fiscal year, ended June 30, net sales at the beauty business fell 2 percent to $19.51 billion.
That’s a large and diverse business to unwind, even if some brands stay at the company.
Sources said Goldman Sachs was hired to both look for buyers for some of the brands and explore a potential initial public offering of at least part of the business. That dual-track structure helps P&G keep its options open, and if it can’t negotiate the price it wants with a private equity or strategic player, the company can fall back on an IPO. Goldman declined to comment.
Bloomberg News reported that P&G sent out sale documents to potential bidders for its Wella hair-care unit, cosmetics brands and fragrance business. The potential buyers included Henkel AG & Co., Revlon Inc., Unilever, Kao Corp. and Coty Inc.
Some brands could also be sold in one-off deals. Frédéric Fekkai is said to be looking to take advantage of the turmoil of restructuring to buy back his luxe hair-care brand, which hasn’t fared so well under P&G’s control.
A P&G spokesman said: “The brands that we will retain will be category leaders that are structurally attractive and play to our core strengths. Every brand that we plan to keep will be strategic with the potential to grow and create value.”
The process will yield a more profitable and easier to operate company, the spokesman said.
It’s a complex situation and a sale of the broad swath of the portfolio or a public offering could hinge on how much traction the brands find in the market.
Citigroup stock analyst Wendy Nicholson said in a recent note to clients that P&G could exit Wella, Sebastian Professional, Fekkai, the fragrances unit, CoverGirl and Max Factor. She cited SK-II and Clairol as somewhat more remote possibilities. All together, those brands represent sales of $7.4 billion, according to Citigroup’s reckoning.
Divestures of just those brands would leave P&G still very much in the beauty game, though.
“We believe that P&G remains very much committed to the beauty business generally, and as such, will likely not sell its core brands of Pantene, Head & Shoulders and Olay (even despite the considerable challenges in these businesses in recent years,” Nicholson said.