Luxury cosmetics firm, L’Occitane International SA recently acquired the British skincare company Elemis for $900 million, with the aim of expanding its operations in the US and the UK, with the French company’s biggest deal in its history.
The Hong Kong-listed company came to a deal with Steiner Leisure Ltd., one of the subsidiaries of the private equity firm, L Catterton. This deal is the newest of a recent string of acquisitions made by high-end skincare brands in the world, keeping up with the growing demand for organic skin products and natural beauty products, a trend that has helped even the cosmetics giant L’Oreal SA.
L’Occitane issued a statement on the matter, saying that this latest acquisition will help bolster the company’s growth across the world, with plans to bring the Elemis brand, popular with millennial as well as Gen X customers, into new, untouched markets, extending the British organic skin products range.
The day following the deal’s announcement, L’Occitane shares dropped by 4.7%, which curbing the stock’s single-digit growth for 2019 a bit.
With this new deal, L’Occitane will be more likely to reach the company’s sales target of €1.7 billion/US$1.95 billion in two years, according to a report from Bloomberg Intelligence. The acquisition also gives the company the ability to launch exclusive products for China, Hong Kong and the US, which are keeping companies in the market growing in spite of Europe’s slowdown.
L’Occitane CEO Reinold Geiger stated that the acquisition is a big step forward for the company in their goal in creating a leading portfolio of premium beauty brands, and that Elemis is in a good spot for continued growth across the world.
Growth in the beauty market across the world grew around 5% in 2018, driven primarily by demand from Asia. As for L’Occitane, the company saw its same-store sales in mainland China going up by 7.4% in the three months ending in September, which is a significant boost from the world average.
According to L’Occitane’s filing to the Hong Kong stock exchange, the deal, which closed within the first quarter of 2019, will be funded by the French cosmetic company’s cash and bank borrowings.