L’Oreal snaps up Australian skincare giant Aesop in $3.7b deal

L’Oréal has agreed to acquire Australian high-end cosmetics brand Aesop from Natura & Co Holding in a $US2.53 billion ($3.7 billion) deal.

Natura had been mulling a partial or total sale of Aesop as part of a broader overhaul being conducted by Fabio Barbosa, who took over as chief executive officer last year. Barbosa has sought to simplify the company’s structure and cut costs.

The transaction will help the Brazilian beauty giant reduce its debt burden and focus on turning around other businesses. Known for its natural, ethically sourced cosmetics, Sao Paulo-based Natura faced a hard time trying to expand globally, with disruptions brought on by the pandemic and Russia’s war in Ukraine leading to cost-inflation pain.

“With a strengthened financial structure and a deleveraged balance sheet, Natura & Co, exercising strict financial discipline, will be able to sharpen its focus on its strategic priorities, notably our investment plan in Latin America,” Barbosa said in a statement.

Aesop, which was founded by Melbourne hairdresser Dennis Paphitis in 1987, was increasingly seen by investors as the crown jewel of the group, which saw other businesses including Avon and Body Shop grow at a slower pace. The unit reported revenue of 880 million reais ($256 million) for the fourth quarter, accounting for about 8 per cent of Natura’s total net revenue, and was the group’s most profitable business, according to Lucror Analytics.

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In addition to giving a chance for Natura to boost efforts on improving operations at its core business in Latin America, the sale brings a much-needed relief on the debt-load front. Its net debt-to-Ebitda ratio jumped to 3.5 times at the end of last year, compared to 1.5 times a year earlier.

In a survey with 32 local and foreign investors ahead of the transaction, Banco Bradesco BBI said most of its clients expected Natura to sell 100 per cent of Aesop at a valuation range of between $US2 billion and $US2.5 billion.

Bank of America Corp. and Morgan Stanley worked with Natura in the sale.