French cosmetics group L’Oréal is buying three skincare brands – CeraVe, AcneFree and Ambi – from Valeant for $1.3 billion, in a cash deal which L’Oreal said would boost its US revenues.
The deal is part of the Candian pharmaceutical firm’s move to shift about $2.1 billion in assets to get cash to streamline its businesses and begin easing its debt burden. Valeant also said it would sell its Dendreon Pharmaceuticals unit to closely held Chinese conglomerate Sanpower Group for about $820 million.
L’Oréal agreed to pay a high price for the Valeant brands to challenge rival Nestlé in the medicated skin-care industry, said Pierre Tegner, an analyst at Natixis in Paris. Skincare is the largest category in the cosmetics industry, accounting for more than one-third of the global market, according to data tracker MarketResearch.com. L’Oréal said that the three brands had an annualised, combined revenue of around $168 million.
"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," Frederic Roze, president and chief executive of L'Oréal USA, said in a statement.
The agreements mark a start to Valeant’s efforts to pay down about $30 billion in debt. The Quebec-based company has been embroiled in scandals about its drugs’ high prices and accounting that led to legal and regulatory investigations along with declines in its share price
Proceeds from both sales will be used to permanently repay term-loan debt under Valeant’s senior credit facility, the company said. The Sanpower transaction is expected to close in the first half of this year, while the sale to L’Oréal should close in the first quarter, according to Valeant.
Valeant bought Dendreon out of bankruptcy in 2015 for $445 million and is selling it at a premium to that price, which is “pretty good in our view”, Irina Koffler, an analyst at Mizuho Securities USA Inc., wrote in a report.
Reuters, Bloomberg
