FRANKFURT (Reuters) - German consumer products group Henkel (HNKG_p.DE) said on Friday it was buying U.S. laundry and home care company The Sun Products Corp from a fund of Vestar Capital Partners in a deal valued at $3.6 billion including debt.
The debt-financed acquisition will add laundry detergents All and Sun and fabric conditioner Snuggle to Henkel's portfolio and make it the No. 2 laundry care maker in North America, behind Procter & Gamble (PG.N) and ahead of Church & Dwight (CHD.N).
"We believe that the opportunity for Henkel to leverage its innovation excellence on Sun brands is enormous, providing significant upside (on top of synergies) to margins," Berenberg analysts said.
Shares in Henkel were 0.6 percent lower at 1045 GMT, making them the top performers on Germany's blue-chip DAX index .GDAXI, which was down 7.1 percent in response to Britain's vote to leave the European Union.
Adding Sun Products' business, with annual sales of about 1.4 billion euros ($1.6 billion) in the United States and Canada, will raise the proportion of sales Henkel's laundry and home care division generates in North America to about a third from 13 percent.
Assuming an operating margin of around 12 percent for Sun, Berenberg said it expected the acquisition to add about 6 percent to Henkel's operating profit in 2017, which would rise to 17 percent by 2019 thanks to revenue synergies.
Baader Bank analyst Christian Weiz said he estimated the deal valued Sun Products at about 2.3 times sales, which he said seemed very attractive, affirming his "buy" recommendation on Henkel's stock.
Sun Products has around 2,000 employees at two production sites and one research and development center in the United States.
Perella Weinberg Partners and Credit Suisse were financial advisors to Henkel, while Cleary Gottlieb Steen & Hamilton LLP acted as legal advisor. The acquisition will be fully debt-financed and is underwritten by Deutsche Bank, JP Morgan and BNP Paribas.
Reporting by Maria Sheahan; Additional reporting by Arno Schuetze; Editing by Paul Carrel and Georgina Prodhan