(Bloomberg)—The biggest beauty companies have been on an acquisition spree in recent years as they hope to court younger shoppers with upstart brands. Japan’s Shiseido spent $845 million to buy clean beauty brand Drunk Elephant in October. And announced on Monday, Coty Inc. agreed to pay $600 million in cash for a majority stake in Kylie Jenner’s cosmetics line and Estee Lauder Cos. bought its remaining two-thirds stake in Korean skin care company Have & Be Co. for around $1.1 billion.
Coty Inc. will have overall responsibility for the portfolio, while Jenner, part of the Kardashian clan, will lead creative efforts and communications, the companies said Monday. The deal values Kylie Cosmetics, which Jenner, 22, started in 2015 as a line of lip kits when she was still a teenager, at about $1.2 billion. Kylie Cosmetics is No. 176 in the Internet Retailer 2019 Top 1000.
Coty has been under pressure to turn its business around, having taken a $965 million writedown this year on brands it bought from Procter & Gamble in 2015. It’s in the first stages of a plan where its seeking a sale of its professional hair and nail brands, such as Wella, Clairol and OPI. The Kylie deal is a “key milestone” in Coty’s transformation, the company said in the statement.
“While the financial implications will be somewhat limited, this transaction, along with Coty exploring strategic options for Professional Beauty, shows that management is moving quickly and aggressively to evolve its portfolio to faster growing channels,” Wells Fargo analyst Joe Lachky said in a note. He rates Coty market perform and has a $13 price target on the shares.
The deal solidifies the status of Jenner as one of the youngest billionaires in the world, according to the Bloomberg Billionaires Index, capitalizing off her family’s fame from the reality series “Keeping Up With the Kardashians.”
Jenner’s line of lip kits paired a liquid lipstick with pencil lip liner. Now the business sells everything from eyebrow gel to skin care like face scrubs and sunscreen oil. First sold only online, her products became permanently available in stores nationwide in late 2018 through beauty retailer Ulta, which has more than 1,100 shops across the U.S.
Estee Lauder to buy Korean brand Have & Be
Estee Lauder Cos. (No. 49) agreed to buy the two-thirds of Have & Be Co., the South Korean owner of Dr. Jart+ cosmetics, that it didn’t already own for about $1.1 billion, its first acquisition of an Asian beauty brand.
Founded in 2005 in Seoul, Dr. Jart+ sells moisturizers, masks, cleansers and serums under names like Cicapair and Ceramidin and will draw revenue of more than $500 million this year, Estee Lauder said in a statement Monday.
Estee Lauder cut its earnings outlook late last month, citing a volatile geopolitical environment. Dr. Jart+ will help expand the company’s consumer reach in the Asia-Pacific region as well as in travel retail, according to the New York-based cosmetics giant. It would rank in the top 10 largest brands owned by Estee Lauder. Tom Ford, Jo Malone, Bobbi Brown and Aveda each do between $500 million and $1 billion in annual sales, the company said at a shareholder meeting last week.
Across the industry, executives are trying to revive sales in the U.S. by targeting younger shoppers and acquiring hot brands. Estee Lauder’s has added Too Faced and Becca, among others, to its stable. While the cosmetics giant was among final bidders for the millennial and Gen Z skin care brand Drunk Elephant, according to Women’s Wear Daily, but lost out to Japan’s Shiseido Co.
Have & Be also owns the men’s grooming brand Do The Right Thing. Estee Lauder first bought a stake in the company at the end of 2015. The current transaction is expected to close next month. Have & Be’s enterprise value is about $1.7 billion, Estee Lauder said, without providing other financial details. It plans to fund the purchase with debt.
Perella Weinberg Partners LP served as financial adviser to Estee Lauder, while Lowenstein Sandler LLP and Kim & Chang served as legal counsel. Have & Be was advised by Michel Dyens & Co. while Skadden, Arps, Slate, Meagher & Flom LLP as well as Bae, Kim & Lee LLC served as its legal counsel.Favorite