French cosmetics giant L'Oreal said Tuesday it had agreed to buy three leading skincare brands from Valeant for $1.3 billion in a move set to give its US offering a facelift.
The acquisition expands the group's presence in the United States and builds on its purchase last summer of the US brand IT Cosmetics for $1.2 billion.
The cash deal will see L'Oreal acquiring the CeraVe, AcneFree and Ambi brands from the Quebec-based pharmaceutical firm in a purchase it said would nearly double the US sales of its active cosmetics division which focuses on aesthetic dermatology.
"The acquisition of CeraVe, AcneFree and Ambi strongly complement L'Oreal's brand portfolio," said Frederic Roze, president and chief executive of L'Oreal USA in a statement.
"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."
The Active division includes dermocosmetic brands such as La Roche-Posay, Vichy and SkinCeuticals.
- A growing US footprint -
Founded in 2005, CeraVe offers a range of skincare products including cleansers, moisturisers and sunscreens as well as a baby line.
It is one of the fastest growing skincare brands in the US with an average growth over the past two years of over 20 percent, L'Oreal said.
Its sales have enjoyed "a favourable dynamic" driven by consumers looking for products endorsed by health professionals for their effectiveness for sensitive skin, Active division president Brigitte Liberman told AFP.
Predominantly sold in the US, the brand's dynamism and its potential on the international market justified the high price paid by L'Oreal, she said.
AcneFree provides acne treatments and Ambi offers products for multicultural consumers.
The acquisition expands the firm's footprint in the United States where the demand for beauty products is flourishing: in the first nine months of 2016, L'Oreal's North American sales grew 5.4 percent compared with just 0.1 in western Europe.
Over the years, North America has become L'Oreal's most important division, accounting for 27 percent of its overall sales.
- Valeant efforts on debt -
The sale comes after a difficult year for the Canadian firm, which grew from a small pharmaceutical company to a global giant in the span of a decade mainly due to a growth strategy based on acquisitions.
The former Wall Street darling has come under fire for steep price hikes on drugs and is currently under investigation in the US over alleged accounts manipulation, with former senior executives being probed for fraud.
Its market capitalisation has collapsed from more than $90 billion in the summer of 2015 to a current value of $5.2 billion.
The embattled drugmaker is also struggling to offload a heavy burden of long-term debt, which stood at just over $30 billion at the end of the third quarter, with Valeant saying the sale would help it "permanently repay term loan debt".
The move comes a day after the drugmaker said it had agreed to sell its Dendreon cancer business to Chinese conglomerate Sanpower for $820 million.
Ahead of the open in New York, Valeant shares rose sharply in pre-market trading, gaining around 12 percent while in Paris, L'Oreal fell to 0.67 percent to 170.20 in early afternoon trade in line with general market sentiment.
|© Provided by AFP L'Oreal is to acquire the CeraVe, AcneFree and Ambi brands from Valeant in a purchase it said would nearly double the US sales of its active cosmetics division which focuses on aesthetic dermatology|
Drugmaker Valeant selling $1.3B in skincare products to L'Oreal
Valeant Pharmaceuticals International (VRX) Tuesday said it would sell three skin care brands to French cosmetics company L'Oréal for $1.3 billion in cash, the embattled drugmaker's latest effort to cut debt and strengthen the company's finances.
The tentative proposed sale, announced the day after Valeant announced similar plans for an $819.9 million cash sale of its Dendreon cancer unit to China conglomerate Sanpower Group, sent the company's shares up nearly 9% to $16.70 in morning trading.
The transactions represent the latest moves in Valeant CEO Joseph Papa's bid to cut the Montreal-based company's estimated $30 billion in debt and enable Valeant to rebound amid investigations about its drug-pricing and distribution policies, along with its accounting practices. The company's shares have lost more than 90% of their value since early August 2015.
Papa, who replaced former Valeant CEO J. Michael Pearson in May, said in a written statement that the company was "pleased to announce the progress we are making in reshaping our product portfolios and driving value for our shareholders."
The skin care products on the sale block include the CeraVe brand portfolios of cleansers, moisturizers, and ointments, along with the AcneFree and the AMBI product lines, which distribute treatments for acne, moisturizing, and other skin care, Valeant said.
The transaction is expected to close during the first quarter of 2017, subject to government regulatory approvals. Valeant said it will use the sale proceeds to repay term loan debt under the company's senior credit facility.
Valeant said it would use proceeds from the planned Dendreon sale for the same purpose. The unit's first and only commercialized product is Provenge, an immunotherapy vaccine for prostate cancer that gained U.S. Food and Drug Administration approval in April 2010, the company said.
The Dendreon deal is also expected to close in the first half of 2017, subject to regulatory approvals.
"With this sale, we are better aligning our product portfolio with Valeant's new operating strategy by exiting the urological oncology business, which is one of our non-core assets," Papa said in a statement about the Dendreon divestiture.
Valeant Strikes Deals to Shed $2.1 Billion in Assets
Valeant Pharmaceuticals International Inc. reached deals to sell $2.1 billion in assets, the struggling drug company’s biggest moves yet to refocus around its consumer offerings and pare its heavy debt load.
The Canadian company agreed to sell three skin-care brands, including its CeraVe line, to French cosmetics giant L’Oréal SA for $1.3 billion. It also said it would sell its Dendreon cancer business to Chinese conglomerate Sanpower for $820 million.
The asset sales are part of Valeant Chief Executive Joseph Papa’s efforts to sharpen the company’s focus on its key franchises in skin drugs, stomach treatments, eye care and consumer health while selling noncore assets to pay down its roughly $30 billion in debt.
Later Tuesday, Mr. Papa will speak at the J.P. Morgan Healthcare Conference in San Francisco, where analysts and investors are anticipating updates on his vision for Valeant. The former Perrigo Co. CEO joined Valeant in May to help restore battered investor confidence.
Valeant’s stock has collapsed since late 2015, when an accounting issue raised questions about its earnings and spurred a crisis of confidence in management. The company’s backers have consistently argued the stock market has ignored the value of the underlying businesses, while its detractors have focused on the company’s debt and slumping earnings.
The stock rose around 5.1% to $16.13 early Tuesday afternoon, but it is still down 82% over the past 12 months and is well below the all-time highs above $260 set in August 2015.
Valeant’s deal announcements eased concerns that the company would have to sell assets at fire-sale prices. It purchased CeraVe in 2008 for $95 million and bought Dendreon out of bankruptcy in 2015 for about $500 million.
“Some good news finally,” Evercore analyst Umer Raffat headlined his note on the sales, saying the reduced revenue would mostly be offset by the lower debt payments.
In a Tuesday note, Wells Fargo & Co. analyst David Maris noted that the proceeds from the sales wouldn’t fully cover the $3.8 billion in debt Valeant has coming due by the end of 2018.
Valeant has put a number of assets on the auction block but has struggled to strike deals at acceptable prices. It came close but ultimately failed to seal a deal to sell stomach-drug maker Salix Pharmaceuticals Ltd. to Japan’s Takeda Pharmaceutical Co. for $10 billion. It is also exploring a sale of its Bausch & Lomb surgical equipment business, which could fetch $2.5 billion, people familiar with the matter have said.
Dendreon is known for prostate-cancer treatment Provenge. The acquisition was Valeant’s first big transaction after losing a hostile bid in 2014 for Botox maker Allergan, which went instead to Actavis PLC for about $67 billion.
Valeant wasn’t a big player in cancer treatments, and Provenge proved a disappointing fit. Provenge had $300 million in sales the year before the acquisition; it isn’t clear what revenue has been more recently.
The CeraVe brand includes cleansers, moisturizers and healing ointments. The other brands—AcneFree and Ambi—encompass a range of acne treatments. L’Oréal, one of the world’s leading cosmetics suppliers, said the three have combined revenue of around $168 million a year.
For L’Oréal, the deal will expand its U.S. presence and add to its offerings that cross between skin treatments and beauty products. Skin care is now the beauty industry’s largest category, accounting for a quarter of the market, but growth has begun to cool in recent years.