Saturday, December 20, 2003

Henkel to acquire Dial The drive to go multinational is not simply a way to extend profits. For some companies, it may be the only path for survival. Increasingly, companies that are strong in a single market are at a major disadvantage to those that have worldwide presence, as product development, retailing, and media have become transnational issues. Henkel KGaA, a major Germany-based consumer products recently announced it would acquired US-based Dial Corp, Henkel is the world leader in adhesive products for home and industry, and is a leading European producer of personal and home care products. Dial's sales, on the other hand, are mostly in the North American market, where it sells personal and household cleaning products, and a few food brands. Dial also has an industrial chemical business, which sells mostly bulk cleaning products and resells related processed materials (like fatty acids and glycerines). Henkel's annual income is in he area of $11.4 billion, while Dial's 2002 income was around $1.3 billion. Their biggest competitors are far bigger than the unit company. They are US-based Procter & Gamble and UK-based Unilever, both companies with over $40 billion in income. The transaction gives Henkel a foothold in the US market and Dial products a chance at European distribution. Henkel product lineup Category Brands Adhesives Pritt (stationery), Metylan, Solvite (wallpaper), Ceresit, Henkel, Rubson, Sista, Unibond (sealants), Loctite, Pritt (glue), Nitromors (solvent), Duck, Sellotape (tape), Paltex (home adhesives), Thomsit (flooring), Tangit (plumbung), Leifen, Pattex, Ponal (carpentry) Laundry Persil, Dixan, Weißer Riese, Fewa (detergent), Silan, Perla (ironing spray) Dishwashing ATA Household cleaning Tenn. Blue Star (cleanser), Clin (windows cleaner) , Lysoform (disinfectant), Opti, Pril, Sil, Somat, Terra (other cleaning products), Hair care Schwarzkopf Henkel (shampoo), Poly, Tadft (hair styling) , Glemo, Gliss Kur, Seborin (hair care) Oral care Antica Erboristeria, Denivit, Licor del Polo, Therame, Teraxyl, Vademecum Skin care Bac, Barnängen, Fa, La Toja, Mont Saint Michel, Neutromed (soap) Aok, Creme 21, Diadermine (skin cream) Fragrances Fiorucc, Krizia, La Perla, Scorpio, Sergio Tacchini Shoe care Pico Bello Henkel lost out earlier this year to buy German hair-care specialist Wella, snapped up by Procter & Gamble. It also unsuccessfully bid for German Beiersdorf, maker of Nivea and Eucerin skin creams, Curad bandages, and a number of personal care products. Beiersdorf was acquired by an investment group. The Dial acquisition will give the company much needed extension both in products and geography. Dial brands                      Category Brand Soap Coast, Dial , Pure 7 Natural, Tone Shampoo Breck, Nature's Accent Laundry 20-Mule Team Borax, BabySoft, Borateem, Fels Naphtha, Purex, Sta-Flo, StaPuf, Trend, Zour Air freshener Renuzit Meat Products Armour Star Frozen pizza Appian Way Baking Cream Corn Starch Here's the analysis from a Wall Street Journal article, ("Henkel Gets Bargain In $2.9 Billion Buy Of Dial Corp", 12/16/2003): Above all, the deal allows Dial to escape some limitations of being a relatively smaller-tier player when compared to the likes of Proctor & Gamble Co. (PG) and Unilever NV (UN). [One analyst] said the deal injects Dial's laundry care business with Henkel's "superb" research and development capabilities. The biggest advantage, according to The Financial Times ("Dial deal gives Henkel greater pricing power", 12/15/2003), the biggest advantage for Henkel may be in Dial's close relationship with Wal-Mart. Giving it "greater clout with Wal-Mart, the world's biggest retailer, whose growing power clearly provides the backdrop to the deal." Consumer goods makers, once able to dominate negotiations with retailers, are seeing the tables turned as global giants such as Wal-Mart, Carrefour and Tesco emerge. A supply contract with Wal-Mart can in itself be the basis of a profitable business; companies that do not supply it will struggle to survive. Dial currently derives 28% of its income from Wal-Mart, making it the personal care/ household care company most dependent on the retail behemoth. The FT article cites studies from Fitch Ratings that declare that "consolidation among consumer goods groups would continue as they sought to make themselves more attractive to Wal-Mart." Henkel sold off several industrial operations in 2001, in order to concentrate on the consumer market. It sold Cognis, a broad-based chemical company. It also sold most of its interest in joint venture Henkel-Ecolab-2001, a company making environmentally friendly cleaning chemicals. It also got rid of lawn care products division Substral, selling it to US-based Scotts. The company indicated that it may sell much or all of its stake in US-based manufacturer Clorox (maker of Clorox bleach and Glad plastic bags), as well as the remainder of its Ecolab holdings. 4:05:29 PM

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