Henkel is upping its bet on hair through its $485 million deal for Zotos International Inc.
Zotos, which has been owned by Shiseido since 1988, makes a line of professional products, including hair color and texturizing options. The business adds to Henkel’s hair operations, which already include Sexy Hair, Alterna, Kenra and Nattura Laboratorios, which owns Pravana and was acquired by Henkel in September.
The Zotos acquisition helps Henkel “further strengthen their position in North American professional hair care,” wrote Jefferies analyst Martin Deboo in a research note.
Zotos, headquartered in Darien, Conn., focuses primarily on the North American market but also sells in Europe and Asia. The business has several brands, including Joico, Agebeautiful, Biotera, Bain de Terre, Vero K-Pak Color, Lumishine, iColor, ISO Options, Quantum, Vita-E and Senscience. The company has about 700 employees and operates both a manufacturing site and research and development facility.
The business posted $233 million in net sales for fiscal 2016.
“This acquisition is part of our strategy to expand our position in attractive markets and categories,” said Hans Van Bylen, Henkel chief executive officer. “It will further strengthen our Hair Professional business in the U.S., the world’s single-biggest hair professional market. The high-performance and high-quality brands are a perfect fit for our beauty-care business.
“At Henkel, we have strong capabilities to identify compelling acquisition targets with a clear strategic fit and attractive valuations,” said Carsten Knobel, chief financial officer of Henkel.
“Shiseido has been an outstanding home for Zotos for almost three decades — as part of Shiseido’s Professional Division, Zotos added even more layers of innovation and artistry to its products and achieved significant milestones, including becoming one of the fastest-growing midsize companies in professional beauty,” said Nancy Bernardini, president of Zotos. “By joining Henkel, we will be taking important steps for the future of our business, focusing on strategic geographic markets that are key to our long-term success while continually invigorating our brands as part of Henkel’s highly complementary portfolio.”
Henkel’s beauty-care division was projected to increase 1.1 percent in organic sales for the first half of the fiscal year — Goldman Sachs analyst Fulvio Cazzol wrote in a Sept. 12 research note that the firm expects 1 percent organic growth in the division.
Henkel isn’t the only company making acquisitions in the hair-care space. Coty Inc. picked up several professional lines, including Wella, when it bought Procter & Gamble’s specialty beauty business in 2016. It also subsequently paid $500 million for hair tools business GHD. L’Oréal USA SalonCentric also recently did a deal, picking up assets from Four Star Salon Services in May that help it expand salon distribution in New York, New Jersey and Connecticut.
For Shiseido, the sale underscores its intention to focus on growing its prestige beauty business globally, as well as its mass, personal care and professional businesses in Asia as part of its overarching business 2020 strategy. The company plans to use funds from the deal to grow its prestige brands and “reinforce production capability,” the company said.
“The professional business has been a cornerstone of Shiseido’s heritage since the company opened its first beauty salon in Japan nearly a century ago, and we remain as committed and focused as ever on cultivating and strengthening this key business in the fast-growing Asian markets, including China and Asia-Pacific as well as Japan,” said Masahiko Uotani, president and group ceo of Shiseido. “Henkel’s offer to acquire Zotos provides a great opportunity for our Professional group to concentrate its focus on its core capabilities in Asia.”