L’Oreal to acquire skincare brand Aesop in $2.5b deal

BLOOMBERG

French skincare giant L’Oréal SA has agreed to acquire luxury cosmetics brand Aesop, which was founded in Melbourne before developing a cult global following, for an enterprise value of $2.53 billion.
The transaction caps months of negotiations as other companies, including private equity firm Permira and Chinese investment firm Primavera Capital also showed interest in the Australian brand, owned by Brazil’s Natura & Co, people familiar with the matter told Bloomberg.
At L’Oreal, Aesop joins a cast of luxury brands such as Lancome and Yves Saint Laurent as the French company bets on a continued drift towards high-end cosmetics.
“The deal marks a shift in L’Oreal’s M&A strategy, having typically targeted brands at an earlier stage in their development to harvest significant revenue synergies,” Molly Wylenzek, an analyst at Jefferies, wrote in a note to clients. “Aesop’s development is already well underway.”
L’Oreal bought Skinbetter Science, a US maker of skincare creams distributed via doctors, in recent months to boost another high-end segment it calls “active cosmetics,” with brands like as La Roche-Posay and SkinCeuticals.
The company’s luxury unit surpassed its mass-market division two years ago to become the group’s largest, and L’Oreal expects the trend to continue. Aesop also brings a focus on clean, sustainable ingredients that can appeal to young consumers, said Bernstein analyst Bruno Monteyne.
For the Brazilian beauty firm Natura, the transaction will help cut debt and focus on turning around other businesses. Natura’s US depository receipts surged as much as 15% in late trading after the deal was announced. L’Oreal shares rose less than 1% in Paris trading.
Aesop opened two stores in China recently and they’ve become the brand’s top sellers worldwide, underscoring its potential there, according to Rogerio Fujimori, an analyst at Stifel.
“L’Oreal has the deep pockets and internal resources to scale up Aesop globally and significantly accelerate its development in China and in travel retail, turning into a billionaire brand in coming years,” Fujimori said in a note.
Founded in 1987, Aesop has developed high-end cachet 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.