Henkel seeks Spotless performance after €940m laundry brands deal

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 enjoy relatively high margins and stable prices.

Henkel's acquisition of Spotless also provides an exit for private equity group BC Partners, which bought the French company from Axa Private Equity in 2010, in a deal that valued the group at €600m. Spotless - which owns brands including Dylon, Colour Catcher and Eau Ecarlate - generated sales of around €280m in the 2013 tax year.

Earlier 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 would 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 warned that the foreign exchange situation was unlikely to improve in the short term.

But the company now generates 44 per cent of sales from emerging markets, compared with 34 per cent in western Europe and 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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