L'Occitane inks US$900 million Elemis deal in luxury skincare boom

[HONG KONG] Luxury cosmetics firm L'Occitane International SA agreed to buy beauty and skincare brand Elemis for about US$900 million, its biggest deal on record as the maker of organic lotions looks to expand in the US and UK

The Hong Kong-listed L'Occitane agreed to buy the privately-held Elemis from Steiner Leisure Limited, according to a statement from the companies Sunday. Steiner is a portfolio company of private equity firm L Catterton which focuses on consumer sector investments.

L'Occitane said the acquisition will help bolster the group's growth globally, with plans to bring the Elemis marque that's popular among millennial and Gen X consumers, into new markets. The deal is the latest in a spate of acquisitions of high-end skincare brands in recent years, with demand for premium, natural beauty products on the rise in Asia.

Shares of L'Occitane fell as much as 3.2 per cent Monday in Hong Kong, narrowing its single-digit growth this year. It has headquarters in Luxembourg and Switzerland.

China Growth

With the Elemis deal, L'Occitane is likely to reach its 1.7 billion euro (S$2.64 billion) sales target in two years, according to a Bloomberg Intelligence note Monday. L'Occitane could launch exclusive items for China, Hong Kong and the US, the three markets which is driving most of its revenue growth to offset the slowdown in Europe, the note said.

"It is a major step forward for L'Occitane in building a leading portfolio of premium beauty brands," Chief Executive Officer Reinold Geiger said in a statement. "Elemis is well positioned for continued global growth."

The deal is L'Occitane's largest acquisition and follows Natura Cosmeticos' purchase of The Body Shop from L'Oreal SA for about 1 billion euros in 2017. Unilever also acquired South Korea's biggest maker of beauty products, Carver Korea Co., for 2.27 billion euros in 2017.

Growth in the global beauty market likely grew 5 per cent last year, driven by Asia demand, according to Bloomberg Intelligence. In Greater China, L'Occitane's biggest sales market, Chinese consumer have shown a willingness to pay for premium and organic skincare and cosmetics products. The company's same-store sales in mainland China rose 7.4 per cent in the three months ended last September, significantly outperforming its average gain worldwide.

L'Occitane, with origins in Provence, France, operates in 90 countries with 3,285 retail outlets, according to its website. The company, which reported 1.3 billion euros in net sales and 142 millions euros in operating profit last fiscal year, listed in Hong Kong in 2010 as it sought to expand in Asia.

The purchase will be funded by L'Occitane's cash and bank borrowings, according to a company filing to the Hong Kong stock exchange. The deal is expected to close in the first quarter of 2019, it said.

BLOOMBERG