French skincare group L’Occitane has announced that it will acquire approximately 83% of body care brand Sol de Janeiro for $450 million. Sol de Janeiro is one of the fastest-growing high-end skincare brands in North America.
French skincare group L’Occitane has announced that it will acquire approximately 83% of body care brand Sol de Janeiro for $450 million. The total cash will be settled by the company’s cash on hand and existing bank financing. Related transactions will complete before Dec. 31 at the earliest and the business combination will start at the beginning of the year.
After the transaction, Sol de Janeiro’s founder Heela Yang will continue to serve as CEO and hold the remaining 17 percent of the stake. She said that the brand’s capabilities in distribution and R&D will be significantly enhanced with the support of L’Occitane Group.
Sol de Janeiro was founded in the U.S. in 2015 by Heela Yang and its products are made with ingredients sourced from the Brazilian Amazon rainforest. It sells body care, fragrance and hair care products directly to consumers primarily through its website. According to data, Sol de Janeiro’s sales jumped 54 percent year-over-year to $60 million last year.
Given that Sol de Janeiro is one of the fastest-growing high-end skincare brands in North America, management from L’Occitane Group said that the deal complements the group’s existing business strategy and will stimulate further growth.
According to the information, the L’Occitane Group currently has five brands- L’OCCITANE en Provence, Melvita, Le Couvent des Minimes, Erborian and L’OCCITANE au Brésil – in addition to the group’s 2019 acquisition of British skincare brand Elemis.
In the six months ended September 30, L’Occitane Group sales soared 18.6% year-on-year to $821 million in virtue of strong growth of 21.7% and 33.1% for L’Occitane en Provence and Elemis, while LimeLife was affected by last year’s high base with a decrease of 28.7%.
However, the group’s revenue slowed in the second fiscal quarter, posting an 11.4% increase. China is still L’Occitane’s most significant source of revenue, jumping 17.3% year-on-year to $763 million. By the end of the reporting period, L’Occitane Group had 1,501 directly operated retail stores worldwide and had a net decrease of 22 stores compared to the same period last year.
It is worth noting that several banks have given a positive and approving attitude to L’Occitane Group’s latest acquisition. Citi said that L’Occitane’s valuation of the Sol de Janeiro deal was reasonable in a report and that Sol de Janeiro’s financial performance was strong raising its revenue growth forecast to 7% and 8% for 2023 and 2024 and maintaining its buy rate.
Lyon also believes that the acquisition of Sol de Janeiro will have a positive impact on the Group’s future growth, which help it to better position itself in the online and youth markets. For its part, Fury highlights that Sol de Janeiro has a relatively mature digital and care business in the US to fill the gap in the US market for L’Occitane Group.
L’Occitane USA, which filed for Chapter 11 bankruptcy protection in New Jersey state court in February due to the pandemic, recently said its restructuring plan was completed after receiving approval from the New Jersey District Bankruptcy Court. It reduced the number of stores from 166 to 133 to pay off all debts.
Analysts from Fury said Sol de Janeiro would contribute 5% to L’Occitane’s sales growth and 6% to net profit next year and it would maintain sales growth of between 30% and 40% over the next three to five years with gross margins continuing to rise.