L'Occitane Adds Elemis for $900 Million as Luxury Skincare Booms

(Bloomberg) -- Luxury cosmetics firm L’Occitane International SA agreed to buy beauty and skincare brand Elemis for about $900 million, as the maker of organic lotions looks to expand in the U.S. and U.K. with its biggest deal on record.

Hong Kong-listed L’Occitane agreed to buy Elemis from Steiner Leisure Ltd., a portfolio company of private equity firm L Catterton that focuses on consumer investments. The deal is the latest in a spate of acquisitions of high-end skincare brands, with demand for natural beauty products on the rise in Asia -- a trend that has also lifted cosmetics giant L’Oreal SA.

L’Occitane said the acquisition will bolster the group’s growth globally, with plans to bring the Elemis label into new markets. The brand has been popular among millennial and Generation X consumers.

Shares of L’Occitane fell 4.7 percent Monday, a day after the deal was announced, narrowing the stock’s single-digit growth this year. The company has headquarters in Luxembourg and Switzerland.

With the Elemis deal, L’Occitane is likely to reach its 1.7 billion-euro ($1.95 billion) sales target in two years, according to a Bloomberg Intelligence note. The company could launch exclusive items for China, Hong Kong and the U.S., which are driving revenue growth during a slowdown in Europe, the note said.

L'Occitane Adds Elemis for $900 Million as Luxury Skincare Booms

“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 SA’s purchase of Body Shop from L’Oreal 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.

Beauty Market

Growth in the global beauty market likely grew 5 percent last year, driven by Asia demand, according to Bloomberg Intelligence. L’Occitane’s same-store sales in mainland China rose 7.4 percent in the three months ended in September, significantly outperforming its average gain worldwide.

L’Occitane, with origins in the southern French region of Provence, 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 million 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.

©2019 Bloomberg L.P.