L’Oreal SA, (OR) the world’s largest cosmetics maker, agreed to buy the Urban Decay brand from U.S. private-equity firm Castanea Partners to expand in specialty makeup.
Urban Decay had sales of $140 million over the last twelve months, more than three times its revenue when Castanea bought it in 2009, the firm said today without disclosing terms of the deal. Regulatory approval is expected before the end of the year, Castanea said.
“Urban Decay is exactly the type of brand L’Oreal needs to beef up its makeup portfolio in the prestige channel,” Pablo Zuanic, an analyst at Liberum Capital in New York, wrote in a note today. He estimates that L’Oreal purchased the Newport Beach, California-based company for about $250 million to $300 million.
The market for specialist makeup brands represents 44 percent of the luxury makeup market in the U.S., L’Oreal said. The Urban Decay brand was created in 1996 and sells products including Naked Palette and Naked Skin liquid makeup.
“Urban Decay will beautifully complement L’Oreal’s Luxe portfolio of iconic brands,” Nicolas Hieronimus, president of L’Oreal Luxe, said in the statement. “It is the makeup specialist we needed to fully satisfy young women in search of playful colors and inspiration in selective distribution at an accessible price point.”
The purchase will “contribute significantly” to the growth of the division for years to come, Hieronimus said. Castanea, founded in 2001, invested in Urban Decay in March 2009, according to the Newton, Massachusetts-based firm’s website.
L’Oreal shares slid 0.3 percent to 104.10 euros at 14:50 p.m. in Paris trading. The stock has gained 29 percent this year.
L’Oreal was advised by Lazard Ltd. (LAZ) and Weil, Gotshal and Manges LLP. Castanea was advised by Deutsche Bank AG, Piper Jaffray & Co., Cooley LLP and Deloitte LLC.
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