Cosmetics M&A at a cruelty-free price

Waldencast

16/11/2021 24:13

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
    TORONTO, Nov 15 (Reuters Breakingviews) - Blank-check firm
Waldencast Acquisition  WALD.O  is slapping on a double layer of
cosmetics M&A. The special-purpose acquisition company said
on Monday https://www.waldencast.com/news/waldencast-announces-three-way-business-combination-with-obagi-and-milk-makeup-as-a-first-step-in-its-strategy-to-create-a-global-multi-brand-beauty-and-wellness-platform
 that it plans to merge with two skincare and makeup brands in a
$1.2 billion deal, creating a company led by L'Oréal  OREP.PA 
and Procter & Gamble  PG.N  veteran Michel Brousset. Milk Makeup
creates vegan, cruelty-free products, while Obagi is a
physician-dispensed brand popular with dermatologists. 
    Natural products without animal testing are hardly a
novelty; younger consumers practically expect them. And the
industry is teeming with rivals  urn:newsml:reuters.com:*:nL1N2PX03N. But the beauty
trade has room for insurgent brands. Unilever  ULVR.L , Procter
& Gamble and L’Oreal together had just 25% of the market in
2020, and their share has dropped since 2015, according to
Euromonitor International data cited by Waldencast. Milk and
Obagi are forecast to increase their combined revenue almost 20%
next year. 
    The deal moreover values the new business at 16.5 times the
company’s projections for 2023 adjusted EBITDA, compared to
L’Oreal and Estée Lauder’s  EL.N  25 times, per Refinitiv data.
That makes it a punt on attractive growth, without an ugly
price. (By Sharon Lam) 
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 (Editing by John Foley and Katrina Hamlin)
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