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June 5, 2014 10:42 am
Henkel has agreed to pay €940m for French laundry and cleaning products company Spotless, in further evidence that the German consumer goods group is seeking acquisitions to strengthen its position in both mature and emerging markets.
The maker of Persil detergents and Schwarzkopf shampoos said the Spotless deal would improve its position in France and Italy, where makers of laundry care products have relatively high margins and stable prices. It also provides another indication that European companies are more willing to spend their cash on acquisitions, as the region’s economic prospects improve.
Henkel’s purchase of Spotless provides an exit for London-based private equity group BC Partners, which bought the French company from Axa Private Equity, now known as Ardian, in 2010, in a deal that valued the group at €600m including debt. BC Partners has doubled its money in four years, according to a person with knowledge of the terms.
Spotless – which owns brands including Dylon, Colour Catcher and Eau Ecarlate – generated sales of about €280m in the 2013 tax year. Henkel is paying about 12 times the company’s earnings before interest, taxes, depreciation and amortisation, compared with the nine times paid by BC paid four years ago.
The German group pre-empted a planned competitive auction of Spotless by delivering a firm offer that matched BC’s return expectations, according to two people with knowledge of the talks.
This week Henkel announced another deal to buy three US hair companies – SexyHair, Alterna and Kenra – for €270m. But, even after buying Spotless, the company still has a war chest of more than €3bn for further acquisitions.
With low growth expectations in mature markets, such as western Europe and the US, Henkel had previously said it will focus on improving profitability in those areas.
It is seeking to strengthen the performance of its top 10 brands, which generated 57 per cent of total sales last year, up from 44 per cent the previous year. The company is aiming to increase that share to 60 per cent by 2016.
Henkel had total sales of €16.4bn last year, a drop of nearly 1 per cent in real terms as the strong euro took a toll.
In the first quarter of this year, it said sales were down 2.6 per cent year on year, driven by further currency effects, and chief executive Kasper Rorsted said the foreign exchange situation was unlikely to improve in the short term.
The company generates 44 per cent of sales from emerging markets, compared with 34 per cent in western Europe, but overall quarterly net income rose 14 per cent to €449m. Henkel is targeting total annual sales of €20bn by 2016 with half from the developing world.
In terms of product mix, half of Henkel’s sales come from its adhesive technology offerings, with nearly 30 per cent from laundry and home care products, and one-fifth from beauty care.
Shares in Henkel were up 0.5 per cent after the Spotless deal announcement, close to a record high of nearly €86 reached last month.
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