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Clarins’ Next Move?: Beauty Firm Suspends Trading in Shares

Groupe Clarins sparked a global guessing game Thursday when it suspended trading in its shares on the Paris Bourse ? and the leading theory is the...

PARIS — Groupe Clarins sparked a global guessing game Thursday when it suspended trading in its shares on the Paris Bourse — and the leading theory is the group aims to go private.

Clarins is expected to make a statement today, sources close to the company said.

The beauty firm has been one of the most sought-after brands for the last few years, with everyone from Coty Inc., L’Oréal, Procter & Gamble, the Estée Lauder Cos., LVMH Moët Hennessy Louis Vuitton, Beiersdorf — and even private equity players — mentioned as possible acquirers.

However, Christian Courtin-Clarins, chairman, has consistently said the group has never considered putting itself up for sale. He recently ticked off a long litany of opportunities for success as an independent to WWDBeautyBiz, “We can double our size in five to seven years.”

Industry sources said most indicators now point to the majority shareholders the Courtin-Clarins family — either with or without a partner — acquiring the company’s publicly listed shares and taking the beauty firm private to give it more flexibility. The Courtin-Clarins clan owns 65.1 percent of the firm’s capital and 78 percent of its voting rights, with 34.9 percent listed on the stock market. The company’s stock stopped trading Thursday afternoon at 43.72 euros, or $68.76 at current exchange, up 1.67 percent versus Wednesday’s close.

The share ownership structure of the company is what has made it difficult for predators to buy the firm — leading to a seemingly endless dance between Christian Courtin-Clarins and some of the industry’s leading players as they attempt to woo him.

While going private appeared to be the most likely result of Clarins’ announcement Thursday, there also is the possibility the beauty firm might be making an acquisition of its own. Christian Courtin-Clarins has said the firm has a 185 million euro, or $287 million, war chest and is looking for a skin care company to acquire, likely in the organic field. He has plans for a joint venture with L’Occitane to build a chain of freestanding cosmetic stores.

One industry source suggested Alès Groupe could be a prime takeover candidate. Others mentioned the prospect of Clarins snapping up a pharmacy brand.

According to some industry sources, were Clarins to keep its current course, it will become increasingly difficult for the firm to remain competitive in numerous arenas, including effectively negotiating with distributors, which requires a certain critical mass. According to analysts, Clarins has never quite recouped the business lost when the fragrance distribution license it had with P&G was terminated on Dec. 31, 2005.

Further, some analysts cite concerns that Clarins puts all of its eggs in one basket — both on the geographic front (since the company generates 64.4 percent of its total sales in Europe, where it does the lion’s share of its manufacturing, too) and brandwise (because almost 68 percent of its revenues comes from its signature brand). Christian Courtin-Clarins, however, told WWDBeautyBiz that this shows how much room for growth the company has.

Generally, analysts don’t believe Clarins buying a brand would make the firm large enough to compete effectively in the long term. Some believe the company should open itself up to a takeover.

One analyst said that, if Clarins were taken over today, the valuation would be 2.5 times its revenues (which in 2007 were 1.01 billion euros, or $1.38 billion at average exchange), due to the brands it carries. Indeed, industry experts say Clarins’ strengths include its signature skin care’s brand equity, plus the Thierry Mugler and Azzaro fragrance names. Other assets are the company’s pole position in the European luxury treatment segment, where it commands 16.5 percent market share, plus its strengths in innovation and in research and development, its sizable product pipeline and its strong financial situation, sources said.

The death of company founder Jacques Courtin-Clarins in March 2007 sparked speculation that Clarins would begin entertaining potential buyers. For months after, rumors abounded that YSL Beauté, the-then beauty arm of PPR’s Gucci Group, would become part of Clarins.

Until late January, when L’Oréal announced it had proposed to acquire YSL Beauté, there was buzz PPR would offer its beauty division to Clarins in return for up to a 30 percent stake in the company and even a right of first refusal if the firm were eventually sold. All throughout, the Courtin-Clarins family steadfastly maintained its unwillingness to cede control of Clarins.

Speculation about a Clarins-related deal might have cooled early in the year, but the company was back in the limelight again recently, due to its revamped management structure. In early June, Philip Shearer became president of Clarins’ management board (after having been its executive vice president), effectively making him the firm’s chief executive officer. It was the position formerly held by Christian Courtin-Clarins. Courtin-Clarins, meanwhile, became president of the firm’s supervisory board.