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L’Oréal to Acquire Urban Decay

The cosmetics giant said it has signed an agreement with private equity firm Castanea Partners to buy the makeup brand.

A product from Urban Decay's Build Your Own Palette.

L’Oréal in Paris said Monday it has signed an agreement with private equity firm Castanea Partners to acquire Urban Decay.

Based in Newport Beach, Calif., Urban Decay executives will report to Carol Hamilton, president of L’Oréal Luxe USA in New York. Hamilton praised Urban Decay as “experts in being able to appeal to younger consumers with the right presentation and the right products.”

She also cited the makeup-driven company’s expertise in navigating what she described as “the newest form of luxury distribution” — specialty chains like Sephora and Ulta.

Wende Zomnir, the makeup expert who created the brand in 1996, said the core consumer is aged 28 to 29 years old, but the audience ranges up to age 40, running the gamut from “edgy girls to people who have kids and jobs and are looking for formulas.”

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Zomnir will continue as general manager of worldwide strategic brand development and creative director. Her current title is chief creative officer.

Nicolas Hieronimus, president of L’Oréal Luxe in Paris, said, “Urban Decay will beautifully complement L’Oréal Luxe’s portfolio of iconic brands. It is the makeup specialist we needed to fully satisfy young women in search of playful colors and inspiration in selective distribution, at an accessible price point. It is totally additional to our existing propositions and as such it will contribute significantly to the growth of the division in the years to come,” he added.

Urban Decay recorded net sales of $130 million in the fiscal year ended in June. L’Oréal did not disclose the sales price. However, industry sources estimate that the price climbed as high as $350 million.

The brand is known for its vibrant shadows and pencils in the brand-leading eye category and has been branching out into complexion and primer products. This fall, the company transformed its Naked color cosmetics franchise into a new line, called Naked Skin, focusing on complexion and providing an entrée into foundation. Chief executive officer Tim Warner said the sell-through was above expectation. Instead of achieving a penetration of 8 to 9 percent, Naked Skin surged to a penetration of 15 to 16 percent. L’Oréal noted that specialist brands account for 44 percent of the luxury makeup market in the United States. In addition to chains like Ulta and Sephora, Urban Decay also distributes through Web sites like urbandecay.com and sephora.com.

“L’Oréal’s strong innovation capabilities and presence in every channel of distribution will enable Urban Decay to reach its full potential in the marketplace,” stated Warner. The acquisition is subject to regulatory approval, which is expected by the end of the year.