E.L.F. Beauty to buy skin care brand Naturium
E.L.F. Beauty has agreed to acquire skin care brand Naturium for $355 million in cash and stock.
Why it matters: Consumer interest in skin care is driving a rush of M&A activity in the space, with large retailers vying for a slice of the market.
Details: The E.L.F. Cosmetics and Keys Soulcare parent will finance the transaction with cash on hand and from its existing credit facility.
- About $70 million worth of E.L.F. shares will go toward the deal as well.
- The purchase price implies a multiple of about 4x net sales and about 21x adjusted EBITDA, E.L.F. says.
What's next: Once the transaction closes, E.L.F. plans to add value to the places where they already have distribution, such as improving Naturium's presence in Target and Amazon, E.L.F. Beauty CEO Tarang Amin tells Axios.
- There's also white space to expand its distribution internationally.
- E.L.F. will also be able to leverage its strength in social channels to build more brand awareness, Amin says.
Zoom in: The company expects its retail sales in skin care to double to about 18% by bringing Naturium into its fold.
- "Naturium gives us another fast-growing brand," Amin says.
- Most of E.L.F.'s skin products are priced at $9, whereas Naturium's products are "masstige" — or prestige for the masses — and priced at $18, pulling in a different consumer.
- "There's definite appetite, particularly when things are accessible, and they're premium quality," Amin says.
Zoom out: E.L.F. Beauty has always been interested in acquisitions, but it has remained highly disciplined, Amin says, especially as the space has always been competitive.
- "Sometimes we'll find a brand that we really like, but the value expectations are just beyond what we feel is reasonable to pay for it," he says.
- "We have the luxury of strong growth. We can be patient and really make sure we have the perfect fit on all those dimensions."
Context: The beauty retailer says the Naturium acquisition is the largest deal in its nearly two-decade history.
- E.L.F. Beauty acquired W3ll People in 2020 for $27 million.
- It also invested in Silicon Valley-based social analytics company Social Standards in 2017.
Catch up quick: Los Angeles-based Naturium was launched in 2019 and says it has created "clinically effective" skin care products at accessible price points.
- It received a minority investment in 2021 from growth equity firm Prelude Growth Partners.
- In addition to its own direct-to-consumer channel, Naturium's products can be found at Target, Amazon, and select international retailers.
- Naturium is projected to generate around $90 million in sales this year, according to E.L.F. Beauty.
The big picture: The skin care market grew to $131.5 billion in 2022 and is expected to grow at a 3% clip a year, according to GlobalData.
State of play: Skin care is driving a wave of investment in up-and-coming brands and biotech firms that are creating ingredients and formulations for new products.
- In June, Debut raised $34 million in Series B funding led by L'Oréal's venture fund Bold.
- Aesop, an Australian clean beauty brand, was snapped up by L'Oréal for $2.5 billion in April.
- Beautycounter, a Santa Monica, Calif.-based clean-beauty products maker, was acquired in a leveraged buyout by the Carlyle Group, valuing the company at $1 billion in 2021.