The move follows L’Oréal’s announcement last week that it was pulling its Garnier brand out of China, a decision that has put the spotlight on the group’s operations in the country following a significant slowdown in economic growth over the past two years
Following approval by the China authorities, the move will see the Hong Kong Stock Exchange listed business become a part of L’Oréal China.
Deal should be completed by second quarter of 2014
The agreement was made after L’Oréal met the pre-conditions of the acquisition and the implementation of the sale will be implemented as a scheme arrangement, which means that the agreement is between the companies and its shareholders.
Subsequently a scheme document is due to be dispatched to shareholders in the Magic Holdings business, and the transaction is expected to be closed during the second quarter of 2014.
Magic Holdings produces facial beauty masks, a category that has proved to be particularly successful in the China market in recent years, having grown exponentially year-on-year.
Tapping into big growth in facial masks
In the period 2012 – 2013, Magic Holdings reported that its sales grew by 25% compared to the period 2011 – 2012, to reach a total €160m, a performance underlined by the fact that the company’s MG brand is one of the leading masks in the category.
L’Oréal says that it intends to build on Magic’s existing management teams, while tapping into its own multi-billion dollar existing research and development facilities in both China and Worldwide to help expand the business.
The new business will now become a part of L’Oréal’s Consumer Products Division in the country, and is likely to be marketed under the L’Oréal Paris and Maybelline New York brand names.
L’Oréal pulls Garnier brand from Europe
Last week L’Oréal has said it would stop sales of Garnier products in China as it appears to be a slowing market.
Instead, the company says it will focus on its L’Oréal Paris and Maybelline New York product lines, which have been better performing in China.
“To strengthen our leading position, we have decided to discontinue the sales of Garnier products in China and focus our efforts on our two leading brands – L’Oréal Paris, the number one beauty brand, and Maybelline New York, the number one make-up brand in China,” a spokeswoman tells Reuters.
According to Euromonitor figures, China’s $25.9-billion cosmetics market is the third biggest in the world and is expected to grow 63% for the five years to 2015.