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Shiseido has agreed to sell bareMinerals and two other US cosmetics brands to private equity firm Advent for $700 million, closing a bitter chapter in the Japanese company’s $2.1 billion expansion into the US.
The sale of bareMinerals, Buxom and Laura Mercier for two-thirds below the original price tag marked a broader strategic shift for Japan’s largest cosmetics group.
Under CEO Masahiko Uotani, the company has said it would focus on higher-margin skincare products, particularly in Asia.
In the past 12 months, Shiseido also transferred its personal care business to CVC, the Luxembourg-based private equity firm, for $1.5 billion and terminated its licensing deal with the fragrance business of Italian luxury brand Dolce & Gabbana.
The divestments announced Thursday came as the Covid-19 pandemic has hurt Shiseido’s sales in Japan and the US. Operating losses in North America tripled to 22.3 billion ($202 million) last year, while local currency sales declined 24 percent.
But even before the pandemic, analysts questioned the $1.9 billion acquisition of Bare Escentuals, the New York-based natural makeup company behind bareMinerals and Buxom, in 2010.
Integration efforts have been slow due to differences in corporate culture and strategic direction. In 2017, Shiseido was also forced to write a $623 million write-off on Bare Escentuals as the US group lagged behind its shift to e-commerce.
Because the deal came just before the final year of Shiseido’s three-year business plan, some investors also saw the acquisition as a means to achieve its numerical goal.
In addition to Bare Escentuals, Shiseido acquired Laura Mercier in 2016 for $248 million. The two brands and Buxom generated sales of 44.8 billion last year, representing 4.9 percent of total group sales.
Shiseido is not pulling out of the US, where Nars cosmetics brand and Drunk Elephant skincare line continue to sell.
“As we are taking steps to prioritize our brands, optimize our portfolio and strengthen our competitive advantages under this strategy, we have decided to transfer the business,” said Shiseido.
In a customer note published Thursday, Yu Sato, an analyst at SMBC Nikko Securities, said the sale of the brands would help improve the profitability of Shiseido’s North American operations, “which has been the biggest negative factor to date. impacted overall profits”.
Jefferies analyst Mitsuko Miyasako said the Japanese group’s focus would shift to how it would achieve its goal of a 15 percent operating profit by 2023. “The main issue is how Shiseido is managing global growth with a portfolio focused on prestige skincare,” she says. added.