Consumer Sector Comment – August 2015

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Last summer, in our Beauty Clearthought publication, we commented on high levels of activity in the beauty sector. Strong appetite from leading global trade buyers, both for large scale and smaller bolt-on acquisitions, has been much in evidence. Well-known multi-brand players such as L’Oréal have demonstrated willingness to acquire small niche beauty and cosmetics brands, with a view to freshening up brand portfolios (bypassing new product development) as well as rapidly accessing new categories and markets. This trend has continued through 2015.

Unilever, in particular, stands out with a  series of acquisitions in premium skincare as the group seeks to build up its personal care business with particular emphasis on prestige channels. As highlighted in our Clearthought, premium skincare offers attractive growth prospects across a number of markets with consumers particularly attracted to niche and specialist products. In March 2015, Unilever acquired UK natural skincare brand REN – a niche brand, sold mainly through specialist stores, department stores and pharmacies. Unilever was attracted not only by the global potential of REN – with well over 50% of revenues coming from 50 countries – but also its position within the fast-growing natural beauty category. The REN acquisition has been swiftly followed by 3 further additions:

  • Dermalogica: a leading US skincare brand, used in professional salons and spas and focused on “skin health”, with 2014 turnover of €215m;
  • Kate Somerville: an independent US prestige brand, distributed via specialist retailers, with an established Asian presence; and
  • Murad: a clinical skincare brand, founded in 1989 with significant presence in the US through professional salons and spas and specialist retailers such as Sephora, with 2014 turnover of €105m.

Unilever is not alone in targeting the premium skincare sector with niche acquisitions, for example: last month, Walgreens Boots Alliance bought Avon’s UK-based premium natural skincare brand Liz Earle for €200m (estimated revenues of around €80m) and Estée Lauder acquired Glamglow, a prestige skincare brand best known for facial masks (estimated 2013 sales of less than €100m), at the end of 2014.

Meanwhile, at the larger end of the M&A spectrum, there is also plenty of interest in beauty brands. Last month, Coty emerged as the winner in the battle to acquire a bundle of P&G’s cosmetics and hair brands for approx. €12bn, demonstrating that more mature mainstream brands are also attractive to the right buyers. By acquiring Wella and Clairol haircare brands, Coty is moving into a completely new category – immediately gaining a strong market position.

At Clearwater International, we expect no let up in M&A and are in active dialogue with players across the beauty sector, both large and small.

 

Selected UK Consumer Deals

Wool Overs, the online and mail order knitwear retailer, has been acquired by private equity firm Langholm Capital. Clearwater International advised the founders of Wool Overs on the sale.

London-based retail platform for designers Wolf & Badger has announced a merger with global online marketplace Boticca.com.

Marquee Brands, a US-based brand acquisition and licensing group (and a portfolio company of Neuberger Private Equity Partners), has acquired branded apparel group Ben Sherman from Oxford Industries Inc. Ben Sherman is the second investment for Marquee Brands this year, following its earlier acquisition of Italian luxury brand Bruno Magli.

The Middleby Corporation, a listed US cooking and food service equipment company, will acquire British heritage brand AGA Rangemaster. Middleby will pay a total consideration of €182m.

Stamp specialists Stanley Gibbons Group has acquired online wine auctioneer Bid for Wine.

Rubie’s Costume Company Inc of the US has acquired celebrity mask and costume specialist Mask-arade Ltd.

PE firm BC Partners Ltd has acquired Côte Restaurants Ltd, the French food restaurant chain, from CBPE Capital LLP. The sale proceeds represent a money multiple of 2.9x CBPE’s original investment in Côte.

Casual Dining Group, owner of Café Rouge and Bella Italia (and a portfolio company of Apollo Global Management), has won an auction to acquire Las Iguanas, a chain of Latin American restaurants.

Synova Capital and Tenzing PE Ltd have backed online provider of luxury travel services Fleetway Travel Ltd.

Diageo plc has sold luxury Scottish hotel Gleneagles to Hoxton Hotel owner Ennismore International Management.

32Red plc, a listed UK-based online casino, poker room, bingo and sports betting operator, has acquired Roxy Palace Casino, an online gaming business, from Hyperlink Media Ltd, a provider of web development, digital marketing and consultancy services, and Applied Logics Ltd, an investment holding company, for a total consideration of €12m.

The Thai Silk Company Ltd, a Thai-based retailer of textile products and operator of a bar and restaurants, has acquired Fox Linton Ltd, a supplier of fabrics, furniture and accessories, from Mr Colin Glossop.