Hong Kong-based private equity house CITIC Capital has retained Moelis to explore an exit from its skincare portfolio company Erno Laszlo, according to four sources familiar with the matter.
A sale of the New York-based dermatological skincare business could be launched late this year or early next year, the sources said. Erno Laszlo generates roughly USD 35m-USD 40m in annual revenue, they noted.
The business is a “small but beautiful” asset that has a very compelling Chinese growth story, the first two sources said. it could be a good fit for PE houses that invest in the consumer sector and own beauty brand portfolios. Chinese strategics could also be interested in Erno Laszlo given its strong growth in China, though they might be more price sensitive, they added.
CITIC acquired Erno Laszlo from Pollen Street Capital in 2014 for an undisclosed amount. The transaction was aimed at bringing the brand into the Asian market via its local network, two of the sources said.
Following the CITIC deal, Erno Laszlo debuted in China in 2014 and now the business has grown to account for about 30% of Erno Laszlo’s total annual sales, the two sources said.
CEO Charles Denton was quoted during an interview in August with Asia Times that Erno Laszlo’s sales in China has been growing by more than 100% YoY. It posted sales of CNY 60m (USD 8.5m) in China in 2017, with 80% of its Chinese revenue derived from online channels.
Erno Laszlo markets itself as Audrey Hepburn’s favorite skincare brand and has since achieved a niche status in China, the first two sources said. Its products are sold in stores at Sephora, department stores such as Harrods and global online beauty retailers like Lookfantastic.com, according to its website.
Recent deals in the beauty space include Shiseido’s [TYO:4911] USD 845m acquisition of Texas-based cosmetics brand Drunk Elephant, which posted an estimated revenue of more than USD 150m in 2018, as announced. Moelis also acted as sell side financial advisor in the Drunk Elephant deal.
Luxury skincare brand Tatcha was sold to Unilever [NYSE:UN] this June for an undisclosed sum. Media reports prior to the deal closing said the transaction value could approach USD 500m and that Tatcha was on track for USD 100m in sales this year.
This news service also reported in August that Tengram Capital, the PE owner of Glendale, California-based prestige skincare brand Algenist, also fielded inbound strategic interest. Algenist currently has 55 employees and aims to break USD 50m in revenue by 2021, according to the report.
Moelis had no comment. CITIC Capital and Erno Laszlo did not reply to requests seeking comments.
by Dong Cao, Yiqin Shen and Emily Fasold