L'Oréal Expands Its Strategy -- WSJ
January 11 2017 - 3:03AM
Dow Jones News
By Nick Kostov
PARIS -- L'Oréal SA plans to buy CeraVe and two other skin-care
brands from Valeant Pharmaceuticals Inc. for $1.3 billion,
expanding the French cosmetics firm's U.S. presence and deepening
its portfolio in a product segment that has become the beauty
industry's largest.
The all-cash deal will give L'Oréal the CeraVe brand, which
includes cleansers, moisturizers and healing ointments, as well as
the AcneFree and Ambi brands, which distribute a range of acne
treatments and skin-care products.
L'Oréal, one of the world's leading cosmetics makers, said the
three brands have an annualized combined revenue of around $168
million.
Companies across multiple industries -- beauty, consumer goods
and pharmaceuticals -- are battling to stake a claim in the
skin-care business, which is highly coveted because of its
crossover appeal as both a medical and beauty product. In 2015,
Unilever purchased four skin-care brands, including Ren and Murad,
while Nestlé last year formed a joint venture with the maker of
Proactiv, one of the world's top-selling acne treatments.
"What you can see in the skin-care market -- in the U.S., Asia
and Europe -- is that people are looking for brands that are
recommended by health professionals," Brigitte Liberman, president
of L'Oreal's Active Cosmetics Division, said in an interview.
For nearly a decade, skin care has outgrown the wider beauty and
personal-care market, according to data tracker Euromonitor
International. Skin care is now the beauty industry's largest
category, accounting for a quarter of the market, but growth has
begun to cool in recent years.
The price paid by L'Oréal "looks high," but the deal "will
clearly strengthen the position of L'Oreal's Active Cosmetics
division in the U.S.," said Hermine de Bentzmann, an analyst at
brokerage house Raymond James in Paris. She added that the deal
would double the unit's revenue in the North American market, where
it made only 12% of its sales in 2015.
L'Oréal shares fell 0.26% to EUR171.35 ($181.17) in midday
trading in Paris.
CeraVe offers a range of skin-care products including cleansers,
moisturizers and sunscreens, as well as a baby line. It is one of
the fastest-growing skin-care brands in the U.S., averaging 20%
annual growth over the past two years, L'Oréal said.
L'Oréal said the three brands would stand alongside the likes of
Vichy, La Roche-Posay and SkinCeuticals in its Active Cosmetics
division, which has been growing in recent quarters, boosted by
strong performances in North America and Latin America.
L'Oreal's Ms. Liberman said the company would first look to
increase sales of the brands in the U.S., particularly by working
with dermatologists and other doctors who would recommend their
products.
"Considering the importance of health -- not only in cosmetics
but also in food and other industries -- these brands should
continue to grow strongly in years to come," she said.
For Valeant, the sale is part of new Valeant Chief Executive
Joseph Papa's efforts to focus the company on its key franchises by
selling noncore assets or milking them for cash to pay down $30
billion in debt.
The deal is expected to close in the first quarter, subject to
the standard regulatory approvals and other conditions, Valeant
said.
--William Horobin contributed to this article.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
January 11, 2017 02:48 ET (07:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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