Unilever’s deal is looking good
• Company to buy fast-growing cosmetics business Carver Korea
Unilever has agreed to pay €2.27bn to buy fast-growing cosmetics company Carver Korea in its latest move to build a global beauty business.
The purchase from Goldman Sachs, Bain Capital and Carver’s founder follows a string of smaller skincare and cosmetics deals as the Anglo-Dutch company pivots away from food.
The deal announced on Monday gives Unilever what it said was the fastest-growing skincare business in South Korea through its AHC brand of antiageing creams, moisturisers and other skin products. Carver also provided a strong foothold in north Asia, the world’s largest skincare market, Unilever said.
HIGH MARGINS
“Unilever continues to build a portfolio of niche brands in premium beauty to capture opportunities in high-margin dynamic categories,” said Ildiko Szalai, analyst at Euromonitor International, which says the South Korean beauty and personal care market has grown faster than the global average over the past five years.
Korean beauty brands are in huge demand throughout Asia and have attracted investors including LVMH and Estée Lauder over the past few years.
Monday’s deal comes even though political tension between China and South Korea has dented earnings of many South Korean cosmetics businesses. Chinese tourists have been big buyers of South Korean cosmetics, but in 2017, China banned group tours to the country over Seoul’s decision to deploy an antimissile system to counter North Korean threats.
Bain and Goldman Sachs jointly bought about 60% of Carver for about $500m in 2016, a source familiar with the matter said on Monday.
That would have valued the whole company at $833m, less than a third of what Unilever is paying, but Carver’s net profit nearly quadrupled in 2016 to $117m, from $32m in 2015, public filings show.
UNILEVER IS WORKING HARD TO BOOST ITS PERFORMANCE AFTER AN UNEXPECTED TAKEOVER BID
Unilever said that Carver’s 2016 sales were €321m, with core profit of €137m.
Based on that figure, Unilever paid 16.6 times ebitda (earnings before interest, tax, depreciation and amortisation), in line with home and personal care deals over the past decade.
Unilever is working hard to boost its performance after an unexpected takeover bid by Kraft Heinz in February. It has since raised its margin target and announced a share buyback and a plan to sell its shrinking margarine and spreads business. The company had already been trying to become more reliant on bath, body and beauty products, which tend to have higher growth and margins than food. To that end, it has bought a string of higher-end cosmetics and skincare companies including Murad, Dermalogica, REN and Kate Somerville.
Bain and Goldman held 60.39% of Carver at the end of 2016, while its founder, Lee Sang-rok, held a 35% stake.