Selena Gomez's Rare Beauty pauses its sale process
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Selena Gomez last week was fêted by Bloomberg for becoming a billionaire, based primarily on the $2 billion valuation for her cosmetics company, Rare Beauty.
But there's a small problem: Rare Beauty isn't yet worth $2 billion, more than six months after hiring bankers to find a buyer at that price. And now the sale process is on hold, according to multiple sources.
- Word is that the effort was focused on strategics, rather than on private equity.
Why it matters: This reflects growing acquirer unease with paying big money for both celebrity brands and mono-brands.
- Celeb: A sale could result in less personal involvement and attention from the namesake celeb, at least in the long-term, which would reduce the asset's inherent value.
- Mono-brands: Strategics in the cosmetics and broader consumer sectors have done plenty of these deals, but mostly as small tuck-ins. Paying a couple billion dollars may feel like too concentrated a risk, particularly given the fickle nature of brand consumers.
Zoom in: The (not drunk) elephant in the room might be Kylie Jenner's Kylie Cosmetics, which sold a 51% stake to Coty for $600 million in 2020.
- Bloomberg reported last year that Jenner wanted to buy back her position from Coty, signaling tensions, but that the two sides couldn't agree on price.
The big picture: To be clear, Rare Beauty is a very successful company. More than $350 million in estimated annual revenue, with products so popular that some stores keep them behind the counter (source: shopping trips with my 13-year-old daughter).
- And Gomez herself has lots of other valuable assets, including entertainment earnings and part of a mental health startup she co-founded called Wondermind.
Zoom in: Rare Beauty's cap table is a bit hazy, outside of Gomez being its largest shareholder.
- For example, sources tell us that VMG Partners has a stake. But VMG doesn't list Rare Beauty on its website, nor has it been otherwise publicly disclosed (including by Bloomberg, which cited Nikki Eslami's New Theory Ventures was the only known outside investor).
Look ahead: The sale process could get restarted in 2025, or an unexpected inbound offer now, but an IPO or reverse merger may be easier paths to that $2 billion.
