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By Ludwig Burger and Martinne Geller
FRANKFURT/LONDON, June 2 (Reuters) - Germany’s Henkel will buy three U.S. hair care companies for 270 million euros ($370 million) in cash as the household products and industrial glues maker aims to strengthen its business with hair salons.
Henkel, which already owns Schwarzkopf hair products, said the three brands - SexyHair, Alterna and Kenra - have annual sales of about 140 million euros, mostly through hair salons.
Henkel has been on the lookout for deals for some time, having saved up a 4 billion euro ($5.5 billion) war chest for purchases but suitable targets have been elusive.
The three brands are being sold by private equity firm TSG Consumer Partners.
Mergers in the beauty industry have been relatively quiet in recent months compared to the food and drink sectors, though large deals have included L‘Oreal’s acquisition in April of Chinese facial mask brand Magic Holdings for about $845 million and Revlon Inc’s $665 million buy of Spanish salon hair care products firm The Colomer Group in October.
Hair care, cosmetics and body care brands are attractive because of their high margins, and are growing faster than packaged food brands, helped by their exposure to emerging markets.
Henkel, which already has salon-exclusive hair care brands such as Igora and Osis as well as retail brands including Syoss, agreed to pay about 1.9 times annual sales for the businesses, more than Revlon’s multiple of about 1.2 times sales for Colomer.
The global hair care market, worth $77 billion, is expected to grow by 6.6 percent per year on average until 2018, according to market researcher Euromonitor International.
“The acquisition will position Henkel as one of the leading companies in the world’s single biggest hair professional market,” Henkel said in a statement. It declined to disclose earnings figures for the assets.
The family-controlled German group is a distant No.4 in the global hair care market after Procter & Gamble, L‘Oreal and Unilever.
Henkel derived about 15 percent of group sales from hair care in the first quarter. It gets almost half its revenue from industrial adhesives following the 3.7 billion euro acquisition of National Starch in 2008.
$1 = 0.7328 Euros Editing by Jane Baird and Louise Heavens