L'Oréal Will Apply IT Cosmetics for $1.2B
Private equity firm TSG Consumer Partners announced Friday that it agreed to sell portfolio company IT Cosmetics to L'Oreal for $1.2 billion in cash.
A source familiar with the matter said that TSG gained more than 25 times its initial investment, which was a "significant" minority stake. TSG acquired the stake in the Jersey City, N.J.-based target for undisclosed terms on Sept. 10, 2013, from founders Jamie Kern Lima and Paulo Lima.
The source, who asked to remain unnamed, said that TSG did not conduct an auction for IT and that the deal came about as a result of the private equity firm's longstanding relationship with the venerable French cosmetics giant.
L'Oreal said in a press release that IT's net sales rose 56% in the 12 months ending last June to $182 million. Its products are sold on QVC, the Shopping Channel of Canada, specialty makeup retailers Sephora and Ulta Salon, Cosmetics & Fragrance (ULTA) - Get Report and on its own website.
The acquisition is L'Oreal's largest since it shelled out $1.7 billion for cosmetics and perfume company YSL Beaute from PPR (now known as Kering).
IT, which will remain at its headquarters under its current management, will join L'Oreal's Luxe Division. The source said that the brand has over 150 employees, up from three when TSG invested in 2013.
"IT Cosmetics will perfectly complement the L'Oreal Luxe's brand portfolio to satisfy the rising demand for makeup as well as hybrid skincare," L'Oreal's Nicolas Hieronimus said in a statement. "We are happy to welcome IT Cosmetics to the L'Oreal dream team which includes other great beauty brands such as Lancome, Kiehl's, Yves Saint Laurent, Armani and Urban Decay."
TSG's previous exited cosmetics investments include Smashbox Beauty Cosmetics, e.l.f. Cosmetics and Pevonia International. The San Francisco-based firm focuses on middle-market companies in the consumer and retail sectors.
In another recent private equity cosmetics exit, Carlyle Group (CG) - Get Report sold its portfolio company, shampoo maker Vogue International, to Johnson & Johnson (JNJ) - Get Report in June. The $3.3 billion deal closed on Monday.
Earlier this week, Bain Capital and Goldman Sachs Group announced plans to acquire South Korean beauty company Carver Korea, reportedly for more than $300 million.
L'Oreal's Euronext-listed shares ticked up 0.69%, to €174.55 ($192.33), late Friday.
Goldman Sachs' Cosmo Roe, Piper Jaffray and Financo's Vennette Ho served as financial advisers to the sellers.
Mark Metts, Christopher Glass, Katy Lukaszewski, Alexis Liu, Jonathan Lee, Timothy Devetski, Omair Khan, Dusan Clark, Lauren Grau, Faye Zhao, Benjamin Rosemergy, Elizabeth Burns, Marc Raven, Miriam Carroll, Diane McEnroe, Colleen Theresa Brown, Clay Northouse and Grady Nye of Sidley Austin provided outside counsel.
Sidley previously represented TSG on its $225 million sale of DenTek Oral Care to Prestige Brands Holdings (PBH) - Get Report , which closed Feb. 8, and its Oct. 6 sale of Stumptown Coffee Roasters to Peet's Coffee & Tea. Along with Financo's Ho, Sidley also advised TSG on its sale of e.l.f. in 2014.
Michael O'Sullivan and Jasmine Roberts of Munger, Tolles & Olson represented the founders.
L'Oreal retained Davin Staats of Lazard as its financial adviser for the deal. Ellen Odoner, Naomi Munz, Jonathan Calka, Aamir Rahman, Giancarlo Ruscio, Joseph Verdesca, Gabriel Gershowitz, Kenneth Heitner, Lexie Maravich, Benjamin Brookstone, Michael Epstein, Lauren Springer, Steven Margolis, Franny Glick, John Sipple and Brianne Kucerik of Weil, Gotshal & Manges were the buyer's external legal advisers. Marshall Gringauz provided in-house counsel.
Lazard's Staats and Weil previously advised L'Oreal on its 2012 purchase of Urban Decay Cosmetics for undisclosed terms.
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