Tue, Sep 26, 2017 - Page 10 News List

Unilever makes US$2.7bn S Korea cosmetics acquisition

CARVING OUT A NICHE:The takeover of Carver Korea is slightly out of line with the consumer goods company’s strategy of acquiring high-end and health-foods brands


Unilever has agreed to buy South Korean cosmetics maker Carver Korea for 2.27 billion euros (US$2.7 billion) to gain a stronger foothold in the world’s fourth-largest skincare market.

Unilever will buy the maker of AHC skincare products from shareholders including Goldman Sachs Group Inc and Bain Capital Private Equity, the London and Amsterdam-based company said in a statement yesterday.

Carver had sales of 321 million euros last year.

For the Anglo-Dutch consumer goods giant, whose brands include Ben & Jerry’s ice cream and Dove soap, the acquisition marks a shift from other recent purchases in niche areas, such as organic tea and vegan mayonnaise, as chief executive Paul Polman pursues a commitment to sustainability.

The company has also been building up a “prestige” arm within its personal care business, targeting high-end brands founded in developed markets, such as Dermalogica, Ren and Murad.

Skincare sales in South Korea could reach US$6.3 billion this year and interest in the Asian country’s cosmetics companies has been heating up.

Bain Capital in April agreed to invest about US$816 million in beauty-products maker Hugel Inc. AHC’s products include moisturizers, toners and sun protection.

South Korean cosmetics companies had robust growth in past years, helped by strong Chinese demand, which has weakened recently amid geopolitical disputes in the region. Operating profit of Amorepacific Corp, South Korea’s largest cosmetics company, dropped 58 percent in the second quarter.

Goldman and Bain bought an 80 percent stake last year, when the company had earnings before interest, taxes, depreciation and amortization of 137 million euros.

While the price Unilever is paying seems “superficially high,” the deal makes sense strategically, said Martin Deboo, an analyst at Jefferies with a “buy” rating on Unilever shares.

“It’s right at the top-end of what Unilever’s paid for things, but it’s pretty profitable and 35 percent of the sales go to China, so they’re acquiring right in the heartland of current beauty trends,” he said by phone.

Unilever shares yesterday fell as much as 0.9 percent early in London.

Last week, Unilever agreed to a US$900 million asset swap with South African investment company Remgro Ltd to reorganize its business in that country.

Unilever has said investors should expect it to spend between 1 billion euros and 3 billion euros on takeovers every 12 months to accelerate its push beyond mainstream products and into healthier or ethically sourced brands.

Many of Unilever’s recent acquisitions have focused on its food arm, where it is also moving to sell its slower-growing spreads division.

However, the company has also been adding to its personal-care brands with deals like the purchase of brands such as Savital shampoo from Latin America, consumer goods giant Quala, in May, and Dollar Shave Club, last year.

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