L’Oreal to buy cult skincare brand Aesop in US$2.5 billion deal
FRENCH skincare giant L’Oreal has agreed to acquire luxury cosmetics brand Aesop, which was founded in Melbourne before developing a cult global following, for an enterprise value of US$2.53 billion.
The transaction, which is expected to close in the third quarter, caps months of negotiations for the asset.
Other companies, including private equity firm Permira and Chinese investment firm Primavera Capital also showed interest in buying a stake in the Australian brand, owned by Brazil’s Natura & Co, people familiar with the matter told Bloomberg last month.
The deal will help Brazilian beauty giant Natura reduce its debt burden and focus on turning around other businesses.
Known for its natural, ethically sourced cosmetics, Sao Paulo-based Natura has faced a hard time trying to expand globally, with disruptions brought on by the pandemic and Russia’s war in Ukraine leading to cost-inflation pain.
“With a strengthened financial structure and a deleveraged balance sheet, Natura & Co, exercising strict financial discipline, will be able to sharpen its focus on its strategic priorities, notably our investment plan in Latin America,” said Fabio Barbosa, Natura’s chief executive officer, in a statement.
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Natura’s US depository receipts surged as much as 15 per cent in late trading after the deal was announced.
The Brazilian beauty company had been mulling a partial or total sale of Aesop as part of a broader overhaul being conducted by Barbosa, who took over as chief executive officer last year.
He has sought to simplify the company’s structure and cut costs.
Founded in 1987, Aesop has developed high-end cache among skincare devotees with its range of pricey creams and lotions for skin, hair and body made from ingredients like geranium leaf and mandarin rind.
From its first store in an underground parking lot in the Melbourne suburb of St Kilda in 2003, it has since expanded globally including dozens of locations across New York and London. Natura acquired a majority stake in the business in 2013.
As the brand grew, outpacing Natura’s other ventures such as Avon and Body Shop, investors increasingly saw it as a crown jewel of the group. Aesop reported revenue of 880 million reais (S$231 million) for the fourth quarter, accounting for about 8 per cent of Natura’s total net revenue, and was the group’s most profitable business, according to Lucror Analytics.
“Aesop taps into all of today’s ascending currents and L’Oreal will contribute to unleash its massive growth potential, notably in China and Travel retail.” said Nicolas Hieronimus, L’Oreal’s chief executive officer, in a statement.
In addition to giving Natura a chance to further improve operations at its core Latin America business, the sale brings a much-needed relief on the debt-load front. Its net debt-to-Ebitda ratio jumped to 3.5 times at the end of last year, compared to 1.5 times a year earlier.
In a survey with 32 local and foreign investors ahead of the transaction, Banco Bradesco BBI said most of its clients expected Natura to sell 100 per cent of Aesop at a valuation range of between US$2 billion and US$2.5 billion.
Bank of America and Morgan Stanley worked with Natura in the sale. BLOOMBERG
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