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Japan’s Kosé to Acquire Tarte Cosmetics

The company is buying a 93.5 percent stake for $135 million, obtaining its first foothold in the U.S. market.

TOKYO — Japan’s Kosé Corp. said Monday it is buying a 93.5 percent stake in New York-based Tarte Cosmetics for $135 million, giving the Japanese company a foothold in the U.S. market.

This story first appeared in the March 18, 2014 issue of WWD.  Subscribe Today.

Kosé is buying out Encore Consumer Capital’s entire stake in the American beauty firm, a mainstay on QVC, as well as most of Tarte founder Maureen Kelly’s shares. Kosé said Tarte’s existing management will remain in place. Encore Consumer Capital is a San Francisco-based private equity investment firm focused on the consumer products industry.

Tarte is described as one of the fastest-growing cosmetics companies in the U.S., logging growth approaching 30 percent annually, according to sources. The company finished 2013 with revenues of $68 million. Last year, Intrepid Investment Bankers LLC’s Beauty Care M&A Report singled out Tarte as one of the industry’s takeover targets.

Kelly, who founded her brand 15 years ago in her bedroom, said that “by joining the Kosé family and adding to that rich portfolio, we can build on what we’ve already accomplished with powerful products targeted at new markets.”

Described as “eco-chic,” Tarte is infused with ingredients such as superfruits, plant extracts, vitamins, minerals and other naturally derived ingredients. In 2010, the company received a boost through an investment from Encore Consumer Capital, and since then, according to the brand, “Tarte has significantly expanded its footprint throughout North America open-sell environments and specialty distribution channels with market-leading retailers such as Sephora, Sephora Inside JCPenney, Ulta, QVC and Macy’s Impulse.” In addition, Tarte has also grown its international presence with Sephora in Southeast Asia and QVC U.K.

Considerably smaller than Shiseido and Kao, Kosé is a distant number three in terms of Japan’s biggest beauty companies. It ranked 21 on last year’s WWD Beauty Inc Top 100 while Shiseido came in at spot number five and Kao ranked number seven.

Kosé does the bulk of its business in Japan but it entered the Chinese market about 24 years ago and it has a small presence elsewhere in Asia. The company’s portfolio of brands includes Cosme Decorte, Awake, Sekkisei as well as licensing agreements for Jill Stuart and Paul Stuart.

Kosé’s net profit for the nine months ending Dec. 31 rose 76 percent to 8.74 billion yen, or $88.27 million at average exchange for the period. Operating profit grew 55.7 percent to 13.67 billion yen, or $138.1 million, while sales grew 7.8 percent to 137.29 billion yen, or $1.39 billion. International sales accounted for only 12 percent of the company’s turnover.

Kazutoshi Kobayashi is president of the family-run company that his grandfather founded in 1946. In 2010, he told WWD Kosé was interested in making acquisitions but hadn’t found a suitable target.

Paris-based Ohana & Co. advised Kosé on the deal.