Why Did L’Oreal Decide To Acquire Three Active Cosmetics Brands From Valeant For $1.3 Billion?

January 13th, 2017 by Trefis Team
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L’Oreal is one of the leading names in the active cosmetics market, a segment that happens to be the fastest growing for the company (8% like-for-like y-o-y growth in 2015). In an effort to further grow its active cosmetics segment, L’Oreal has announced its intention to acquire the skincare brands, CeraVe, AcneFree and Ambi from Valeant Pharmaceuticals for a sum of $1.3 billion. According to Frédéric Rozé, President and CEO of L’Oréal USA, the brands will be suitable additions to L’Oreal’s portfolio that currently contains names such as La-Roche Posay, Vichy, and Skinceuticals. The brands to be acquired are quite popular with health professionals and are expected to almost double the revenue for its active cosmetics division in the U.S.

The brands are also expected to strengthen the company’s ties with health professionals who are a key towards developing products in the active cosmetics market. L’Oreal’s market position in North America, the fastest growing geography for active cosmetics, is expected to grow further due to the acquisitions. L’Oreal’s influence in other geographies, by virtue of being the global cosmetics leader, gives it the opportunity to expand the footprints of the acquired brands beyond North America.

Founded in 2005, CeraVe is known for its advanced skincare products such as cleansers, moisturizers, healing ointments, sunscreens, and baby products. Touted as one of the fastest growing companies in North America, the company demonstrated an average of 20% growth rate over the last couple of years. AcneFree is known for its over the counter cleansers and acne treatment products in the U.S. while Ambi distributes products that addresses the needs of multicultural consumers. The annualized revenues of the three brands combined is estimated to be around $168 million.

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The global beauty and personal care industry is expected to  double its current size over the next decade to decade and a half. The cosmeceutical or active cosmetics market will reap the benefits of this growth since it is one of the most rapidly growing segments in the beauty and personal care market. According to a recent report by Research and Markets, the global cosmeceutical market is expected to grow at a CAGR of nearly 6% between the period of 2017 to 2021. The biggest markets are expected to be the US, China, Brazil, Japan, and India. L’Oreal’s acquisition will help it in further growing its active cosmetics business and thus increase its market share in segments such as skincare. 

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
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