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Henkel Still Has $6.8 Billion for Deals After June Spree

Henkel AG Chief Executive Officer Kasper Rorsted
Henkel AG Chief Executive Officer Kasper Rorsted said, “We pretty much expect the same position in January when we pay for the two acquisitions. That gives us approximately 5 billion euros firing power.” Photographer: Krisztian Bocsi/Bloomberg

Henkel AG Chief Executive Officer Kasper Rorsted said the maker of Loctite glue and Persil detergent still has about 5 billion euros ($6.8 billion) for acquisitions after deals in the U.S. and France last month.

Further expansion in the U.S. and Mexico is an option as there are few opportunities to buy prize assets in emerging markets, Rorsted said in an interview in New York. June was already the biggest month for deals under his watch.

Expansion in the U.S. would be an incursion into the heartland of rival Procter & Gamble Co. Hair-care is a key growth market that’s become a battleground for consumer-product makers and their ingredient suppliers such as Dow Chemical Co. Last month, Dusseldorf-based Henkel agreed to buy three U.S. hair-care and styling brands for about $368 million.

“If we can get strong assets in the emerging countries, they have the compelling underlying that they will deliver higher long-term growth, but we see very few quality assets in the emerging markets,” Rorsted said.

Curbing Henkel’s appetite for deals are the inflated price tags, said Rorsted, which are being driven by companies’ strong balance sheets and low interest rates.

‘Excess Cash’

“So what do you do with excess cash?,” the CEO said.

Rorsted overcame a reluctance to meet sellers’ demand with the planned purchase of Spotless Group SAS, a Paris-based laundry aid, insect control and household-care company being bought for 940 million euros. Those takeovers haven’t dented Henkel’s budget, according to the CEO. Henkel, which says “right price, strategic fit and availability” are the criteria for deals, had said before June’s spree that it had an M&A budget of 4 billion euros to 4.5 billion euros.

Henkel today rose 0.4 percent in Frankfurt trading, valuing the company at 35 billion euros.

The German company has a target of increasing revenue to 20 billion euros in 2016 from 16.5 billion euros last year, with half of sales coming from markets such as Latin America or the Asia-Pacific region. Henkel has struggled to find deals which fit its criteria in those regions, according to Rorsted.

Henkel is also looking to sell businesses with revenue of about 250 million euros.

Rorsted is halfway through a plan announced in 2012 to shed non-strategic activities with about 500 million euros in revenue. Henkel sold its specialty coatings business to SKion GmbH in August 2013 for an undisclosed sum.

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