Shiseido has made a dramatic entry into the natural cosmetics market by acquiring Bare Escentuals, an American producer of mineral cosmetics. In a deal worth US $1.7 billion, it is the Japanese cosmetic firm’s biggest acquisition and the largest deal in the natural cosmetics industry.
Bare Escentuals is being bought for $18.20 a share, a 41 percent premium over the average closing price of the last three months. Bare Escentuals has been listed on the Nasdaq stock exchange since 2006. The San Francisco-based company has shown remarkable growth, expanding from a $20 million small outfit to a $600 million business over 10 years.
Established in 1872, Shiseido is Japan’s largest cosmetics company. The Tokyo-based company owns beauty brands such as Shiseido, Elixir Superieur and Maquillage. Although Shiseido operates in over 20 countries, the bulk of its $7.5 billion sales are from its home market.
By acquiring Bare Escentuals, Shiseido has entered a fast growth and highly profitable sector of the cosmetics industry. Global natural cosmetic sales are growing by over 15 percent a year, with Bare Escentuals one of the largest operators in North America. It is the world’s leading producer of mineral cosmetics, marketing its products under the i.d. bare Minerals, i.d. cosmetics, and Rare Minerals sub-brands.
Organic Monitor sees this as an important acquisition that gives synergy to both companies. The purchase gives Shiseido access to the high growth natural cosmetics market; it also helps the Japanese company achieve its target of raising its overseas sales to 50 percent by 2017. The portion of Shideido’s overseas revenues is predicted to rise from 38 percent to 42 percent as a result of the deal.
Bare Escentuals will gain from Shiseido’s extensive distribution infrastructure. About 85 percent of the American company’s sales are from its home market. Export has been a major focus since the company was publicly-listed in October 2006. However, it has yet to make significant inroads in Europe and Asia. Organic Monitor expects Bare Escentuals to utilise Shiseido’s distribution networks and internationalise its sales. Premium channels, such as department stores and beauty retailers, are most suited to the mineral cosmetics range of Bare Escentuals.
The purchase price of $1.7 billion may come as a surprise, since it is almost three times Bare Escentuals revenues. However, previous deals involving natural cosmetic firms have involved sale prices of up to five times company’s revenues. With the global economy slowly coming out of recession and investment restrictions easing, Organic Monitor expects to see more such acquisition activity in the natural cosmetics industry.
Related report: #7051-60 Strategic Insights: Mergers, Acquisitions & Investments in Natural Personal Care Industry
Posted: January 18th 2010
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