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Henkel Wipes Up Spotless for $1.3B

Stocks in this article: JPM

NEW YORK (The Deal) -- German household products maker Henkel Thursday. June 5, announced its second acquisition this week, agreeing to buy French household cleaner and insect control company Spotless Group from London buyout shop BC Partners.

Henkel, of Dusseldorf, said it would pay 940 million ($1.3 billion) including debt, which it will finance out of existing cash.

The German maker of Loctite adhesives and Right Guard deodorant is bulking up in the U.S. and Europe with the help of financial investors. On Monday it agreed to buy three professional haircare brands from San Francisco's TSG Consumer Partners for 270 million.

Henkel CEO Kasper Rorsted two years ago promised to boost sales to 20 billion by 2016, the key driver behind the acquisitions. Last year the company's sales stagnated at 16.4 billion.

Spotless, based in the Paris suburb of Neuilly-sur-Seine, had 2013 sales of 280 million. It employs 470. The deal is expected to close in the first quarter of 2015. The target gets about half of its revenue from cleaning products and BC has overseen a number of acquisitions, particularly in insect control. Henkel shares were up just under 1%, or 0.65, at 85.89 in mid-day Frankfurt trading.

"The acquisition of Spotless Group comes at a pretty valuation but that's possibly explained by the high margins. Without including synergies, the purchase should add 1% to earnings per share in 2015," wrote Commerzbank analyst Andreas Riemann in a note. He has a buy rating on Henkel.

BC Partners bought Spotless from AXA Private Equity in 2010 for 600 million. The investor made two times its money in the four years it held Spotless, according to a source who refused to divulge how much equity BC put in the company.

Two years ago Spotless bought four brands from L'Oreal: Dr. Optic glasses cleaner, Zensect insect control products and the Croc'Odor and Iba air fresheners. Last year it picked up the K2R spot remover line from Switzerland's Hedoga AG.

"The company has leading market positions in established European markets such as France, Italy, Spain, the U.K. and the Benelux countries," Henkel said.

JPMorgan Chase (JPM) and Rothschild acted as financial advisers to BC Partners.

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