Aesop owner evokes goose and golden egg fable
09/12/2022 14:32
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Sharon Lam
TORONTO, Dec 9 (Reuters Breakingviews) - One of Aesop’s
best-known fables involves a goose and the golden eggs it lays.
Human greed leaves the bird dead, and Brazil’s Natura NTCO3.SA
risks befalling a similar fate with its luxury skincare brand
that shares a name with the Greek storyteller.
The $3 billion cosmetics company, which also owns Avon and
The Body Shop, first bought control of Aesop in 2012. The 65%
stake cost A$68 million ($46 million), valuing the
Australia-based maker of high-end creams and lotions at about
1.6 times sales. It later acquired the rest, and expanded it
from more than 60 locations to 385, including 105 in department
stores. More growth awaits. Aesop just opened a shop in
Shanghai, its first in mainland China.
And yet Natura is exploring strategic opportunities for
Aesop. Options include a spinoff or stake sale. The business
attracted interest from buyout shop CVC Capital Partners as well
as L’Occitane International 0973.HK and Shiseido 4911.T ,
according to Bloomberg.
Although Aesop only accounted for about 6% of the top line
last year, it is on pace this year to have grown 15 times under
Natura’s stewardship, Aesop Chief Executive Michael O’Keeffe
told investors in May. A group of peers, including L’Oreal
OREP.PA and haircare specialist Olaplex OLPX.O , trade on
average at 17 times expected EBITDA for the next year, a healthy
premium to Natura’s 7 times. On the 730 million reais ($140
million) of adjusted EBITDA that Citi analysts estimate Aesop
will generate in 2023, Aesop would be worth $2.4 billion.
Selling a piece of it might help Natura pare its borrowing
levels and allow it to focus more on Latin America. Although the
company restructured its debt, extending payments beyond 2025,
per Itaú Unibanco analysts, Aesop’s net debt, excluding
international accounting rule adjustments, grew to about 4.2
times EBITDA in the third quarter from 2.7 times a year earlier.
Like the farmer who tried to extract riches faster from his
goose, Natura is endangering its own golden eggs. As revenue at
the company’s other three divisions fell in the nine months
through September, Aesop’s grew 8%. It’s a bad time to be
testing public markets and bringing in a partner often leads to
complications. Any misstep could mean Natura gets less than full
value for Aesop or creates a costly distraction. It would be
wise to heed the moral of the story.
Follow @sharonlam_ on Twitter
CONTEXT NEWS
Brazilian cosmetics company Natura is working with Bank of
America and Morgan Stanley to sell a stake in its Aesop unit,
Bloomberg reported on Nov. 29, citing unnamed sources. The
division also has attracted interest from private equity firm
CVC Capital Partners and competitors such as L’Occitane
International and Shiseido, the news service said.
Natura on Nov. 10 repeated that it was analyzing strategic
opportunities for Aesop, which it first disclosed on Oct. 17.
The company said it had never considered selling 100% of Aesop
to third parties, and that the strategic opportunities under
consideration focused on accelerating growth and unlocking
value.
(Editing by Jeffrey Goldfarb and Amanda Gomez)
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