French cosmetics company L'Oreal has bought Australian luxury brand Aesop from its Brazilian parent Natura for $2.53 billion.
The deal is the biggest-ever acquisition for Paris-based L'Oreal, the world's biggest cosmetics company, after its $1.7 billion buyout of YSL Beaute in 2008, according to Dealogic.
L'Oreal beat out other bidders for Aesop, which reportedly included Japan's Shiseido and LVMH, the French luxury house helmed by the world's richest person, Bernard Arnault.
The acquisition, which will be paid in cash, is subject to regulatory approvals and is expected to close in the third quarter of 2023, the companies said in a joint statement on Monday.
"Aesop taps into all of today's ascending currents and L'Oreal will contribute to unleash its massive growth potential," said Nicolas Hieronimus, chief executive of L'Oreal.
The acquisition would allow L'Oreal to expand its presence in the growing luxury cosmetics market, with a particular focus on China and travel retail.
It would also provide financial relief to Sao Paulo-based Natura — the owner of the Avon and The Body Shop brands — as it deals with heavy debt and shrinking margins amid a challenging economic environment.
Natura will focus on growing its Avon and The Body Shop businesses while also focusing on its investment plans in Latin America, said Fabio Barbosa, chief executive of Natura.
"The divestment of Aesop marks a new development cycle for Natura.
"With a strengthened financial structure and a deleveraged balance sheet, Natura, exercising strict financial discipline, will be able to sharpen its focus on its strategic priorities.
Aesop, which has headquarters in Melbourne and London, is Natura's most profitable brand. It became a part of the Brazilian company in 2012 after Natura bought a 65 per cent stake.
The company's sales have since surged multifold to $537 million in 2022 from $28 million in 2012. It also grew its store count to 395 from 52, while increasing the number of markets it served to 29 from eight during the same period, the company said.
The L'Oreal deal is part of the "next phase of our development", Aesop chief executive, Michael O'Keefe, said.
It also comes after a shift in Natura's top management in June last year, in which chief executive and executive chairman Roberto Marques stepped down and was replaced by board member Fabio Barbosa.
Notably, Aesop in 2022 opened its first stores in China, which aligns with L'Oreal's strategy to tap into the growing luxury cosmetics sector in the world's second-largest economy.
Revenue in the global luxury cosmetics market was estimated at more than $50 billion in 2022 and is projected to grow to around $67.6 billion by 2028, at a compound annual rate of nearly 5 per cent, data from research firm iMarc Group shows.
chief executive of L'Oreal
In China, the cosmetics market has grown significantly in the past decade, with retail sales hitting 393.3 billion yuan ($57.2 billion) in 2022, according to Statista.
The potential of the cosmetics industry has led to a number of major acquisitions in the past years.
The most recent significant deal, in November, was when New York-based Estee Lauder bought luxury brand Tom Ford for about $2.8 billion, including debt, marking its biggest acquisition.
In 2018, Capri Holdings bought Italian luxury fashion brand Versace for $2.12 billion. In 2020, VF Corporation — which owns the Vans, Timberland, Altra and The North Face brands — bought streetwear company Supreme for $2.1 billion.
Morgan Stanley served as lead financial adviser for the transaction, while Bank of America acted as the financial adviser, and Davis Polk & Wardwell as the main legal adviser to Natura, the statement said.
