Would-Be Buyers of Organix Naturally Hesitant on Name
Many private-equity firms are second-guessing their decisions when deciding whether or not they should risk investing money behind a product called Organix, by the company, Vogue International. The hair-care products are being criticized for not being what its name may assume to be which is organic. The products fail to meet California’s standards where in order to market products that are considered to be organic must contain 70% organic ingredients by weight that excludes water and salt. The company can resolve this issue if the products are renamed to OGX with formerly Organix written in the back. Goldman Sachs currently advises the company and has been reaching out to private-equity firms to invest, but many withdrew because of the controversy over the branding issues. Goldman Sachs originally priced one billion dollars on Vogue but after corporates placed their bids, many were targeting the price range of $700 million to $800 million due to the branding concerns. The founder of the company claims that he might have to sell to a bidder that is not the highest because he prefers to participate with an enterprise that wont have payments tied to the company meeting future performance targets.
As I have learned from this article, branding a product can lead a company to face many legal issues, and plays a huge role in determining profits as well. Although the distribution of the Organix shampoos have increased the sales of chains such as Wal-Mart, Walgreens, and CVS Caremark increase, for other products, it can decrease the amount of profits the company takes in. In this case, many corporate bidders are failing to make offers due to the brand name that is misleading and has attracted litigation. Many corporate bidders do not want to invest in products that have “baggage.”
Written by: Samantha Chin
Source: The Wall Street Journal