L’Oréal’s dermatological beauty division, which also includes the La Roche-Posay brand, has grown by high double digits in recent years | Image: Wikimedia Commons
L’Oréal is acquiring a 10 percent stake in Swiss skincare company Galderma from a group of major shareholders, the two companies announced Monday. The French company wants to earn a share of the profits from the growing market for injectable cosmetics.
Galderma, originally founded as a joint venture between Nestlé and L’Oréal, sold its 50 percent stake in 2014. At the end of March, the company floated a first tranche of its shares on the stock exchange.
L’Oreal will now acquire a 10 percent stake for an undisclosed premium from Sunshine SwissCo AG, a consortium led by Swedish private equity firm EQT – Abu Dhabi Investment Authority (ADIA) and Auba Investment Pte. Ltd.
Shares in Galderma, which had a market capitalization of nearly 16 billion Swiss francs ($18.85 billion) at the close of business on Friday, according to LSEG data, rose more than 7 percent on the news, on track for their best day since its IPO.
Shares of L’Oréal fell about 1 percent.
The stake, which is worth CHF 1.6 billion based on Galderma’s market capitalization, is small for the French company, the sixth largest in Europe.
But it marks a shift in strategy, as for the first time the company is taking a stake in injectable products that reduce wrinkles, such as fillers and neuromodulators, which include Botox.
“This allows us to explore opportunities for collaboration in the fast-growing beauty market, an important complement to our own pure beauty offering,” said Nicolas Hieronimus, CEO of L’Oréal, in a statement.
About half of Galderma’s revenue comes from injectables, a market worth €9.3 billion last year, Hieronimus told analysts on a call.
“The penetration rate of these procedures is already in the mid-single digits. If we look at the number of people considering having these procedures, the penetration rate could double in the next decade,” he said.
The two companies also signed a letter of intent to collaborate in research and development.
The deal will ultimately allow the two companies to jointly develop new products to expand their respective portfolios, a Galderma statement said.
“The stake is positioned as a strategic stake to facilitate collaboration on product development, but we believe it is also a way to get closer to Galderma with a view to greater ownership/control over time,” analysts at Jefferies said.
L’Oréal will not serve on Galderma’s board of directors to avoid any relationship involving similar business activities, the executives said.
The two companies also compete in skin care with Galderma’s Cetaphil brand and L’Oréal’s CeraVe.
L’Oréal’s dermatological beauty division, which includes the La Roche-Posay brand, has seen high double-digit growth in recent years, fueled by social media and consumer interest in science since the COVID pandemic.
But the unit’s growth slowed to 10.5 percent in the second quarter, falling short of expectations, partly due to increased competition.
According to MarketsandMarkets, the global aesthetic products market is expected to grow from $15.4 billion last year to $25.9 billion by 2028.
“Injection techniques have evolved a lot, it is easier to perform and less painful,” adds Hieronimus.
The transaction will be financed with L’Oréal’s available cash and credit lines and is expected to close in the coming days, the French company said.
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First print: Aug 05, 2024 | 5:08 PM IST