For L’Oréal the transaction is an opportunity grow its business exponentially: “The company wants to deepen its mark in [the dermocosmetics] segment by expanding its brand portfolio to mass segment consumers with a wider price range and with more specialist solutions,” explains Nicholas Micallef, senior beauty and personal care analyst at Euromonitor International.
For Valeant, a Quebec, Canada – based company (with US headquarters in New Jersey), the deal may be one of self-preservation. Valeant is reportedly in debt for over $30b. And this sale to L’Oréal as well as the sale of the company’s cancer treatment business Dendreon to Sanpower Group for nearly $820m are meant to reduce that financial burden. “We think these two assets we sold today certainly go a long way toward helping us,” Joseph Papa, CEO of Valeant, remarked in a CNBC interview Tuesday.
The brands
L’Oréal formally announced the deal that same day, calling it a “definitive agreement” to acquire the CeraVe, AcneFree, and Ambi brands for $1.3bn.
The CeraVe product portfolio comprises cleansers, moisturizers, sun care, and healing ointment as well as baby care products. Founded in 2005, CeraVe, as the L’Oréal press item notes, is growing quickly in the US. "Average growth over the past two years [exceeds] 20%.”
Valeant acquired the Ambi brand from Johnson & Johnson in 2012. This mass market product collection consists of cleansers, facial creams, bar soap, body lotion, and more. These are all “formulated for the needs of multicultural consumers,” according to the press item.
And AcneFree is simply a collection of cleansing and treatment products for acne-prone skin. The collection includes a skin cleansing bush devise, wipes, masks, body spray, spot treatment, and prepackaged product kits for different skin types. Like Ambi, AcneFree is sold at mass and in the drug store channel.
The plans
The newly acquired brands will reside in L'Oréal's Active Cosmetics Division, alongside La Roche-Posay, Vichy, and SkinCeuticals.
“These brands will deepen our relationships with health professionals and will strengthen our positions in North America in this key and fast growing market,” Brigitte Liberman, president of L'Oréal active cosmetics division, tells the press. She goes on to note that “we believe CeraVe has a great potential for international growth in the years to come.”
Frédéric Rozé, president and CEO of L'Oréal USA has great confidence in the wisdom of this purchase: “The acquisition of CeraVe, AcneFree and Ambi strongly complement L'Oréal's brand portfolio," he says.
“These three brands, built on strong relationships with health professionals and widely distributed, will nearly double the revenue of our Active Cosmetics Division in the US and will help us satisfy the growing demand for active skincare at accessible prices,” explains Rozé.
Euromonitor analyst Micallef notes that it’s more than mass market active skin care that company is gaining. “The acquisitions also broaden L’Orèal’s presence in baby care and sun care in the US market, where for example, CeraVe witnessed a nearly threefold growth in sun care over 2010-2015, reaching US$27 million. With such performance, this is a double win for L’Oréal as it reinforces it position in these categories with targeted products.”