Smashbox Cosmetics, the brand founded by the great-grandsons of legendary Hollywood makeup artist Max Factor, is said to be close to signing a deal with a buyer.
Smashbox’s prowess in fast-growing retail channels, particularly TV shopping, and its presence in open-sell store formats, including Ulta, Sephora and Macy’s Impulse Beauty concept, make the company an attractive target for established beauty firms struggling to untether their businesses from department stores.
The Estée Lauder Cos. Inc., L’Oréal, Avon Products Inc. and Procter & Gamble Co. are said to have looked at the company within the last year and a half. Spokeswomen for the companies declined to comment.
The brand, which brothers Dean and Davis Factor started in 1996, generates about $130 million in wholesale revenue and $250 million in retail sales, according to a source with knowledge of the company’s finances. A sale likely would fetch $300 million to $400 million, based on industry estimates.
The line, best known for camera-friendly products such as Photo Finish primer and Photo Op Under Eye Brighter, is sold in Sephora, Ulta and in select Macy’s doors, as well as on QVC and online at smashbox.com and Beauty.com.
Private equity firm TSG Consumer Partners acquired a stake in the cosmetics company in 2006. Over the past two years, Smashbox intermittently has met with potential strategic buyers, including major beauty firms, industry sources said. They added that, about six months ago, Smashbox tapped Deutsche Bank to act as a financial adviser as it considered strategic alternatives, including the potential sale of the company. Deutsche Bank did not return calls seeking comment Thursday.
Budd Taylor, president of Smashbox Cosmetics, said the company was not for sale. “People often simply assume that eventually there is a sale whenever there is a private equity firm involved, and I am sure that is what ends up fueling rumors, but we are not for sale,” he said.
Hadley Mullin, a managing director at TSG, reiterated: “While Smashbox regularly receives inbound inquiries from strategics, the company is not for sale.”
Still, multichannel beauty brands have been in high demand of late — and have commanded high prices.
Shiseido Co. Ltd.’s $1.7 billion acquisition this year of mineral makeup company Bare Escentuals Inc. has given the Japanese cosmetics giant a stronger foothold across all retail channels, TV shopping and open sell included. Bare Escentuals is lauded for being at the forefront of the distribution in the U.S. beauty revolution, combining midmarket specialty store chains, such as Sephora and Ulta, with a strong TV shopping component and a department store anchor. It also operates its own stand-alone boutiques.
Smashbox, which is consistently a top-selling cosmetics brand on QVC, has similar appeal.
As for potential buyers, Smashbox would not seem to fit into the strategic focus of Lauder as outlined by Fabrizio Freda, the beauty firm’s president and chief executive officer. Freda consistently has named skin care and Asia as the firm’s two biggest opportunities.
During a roundtable with reporters in February, Freda said potential acquisitions must offer a distinctive positioning and growth, even if from a small base, and they must “live within high-touch retail channels.” He noted that historically, Lauder has plucked smaller brands, such as La Mer, from North America and “worked to make them a global, winning brand within two to three years.” But going forward, Lauder also plans to look overseas for acquisition targets. Freda said at the meeting that, for the time being, Lauder will steer clear of “transformational acquisitions” or large purchases that rely on creating cost synergies. “We’re not ready for that yet,” he said.
Lauder also is shedding underperforming businesses. In late January, the company shuttered retail distribution for its Prescriptives beauty brand, shifting the business to the brand’s Web site while supplies last.
One Wall Street analyst noted while Smashbox doesn’t neatly fit into Lauder’s strategic priorities, “Lauder can’t ignore open sell anymore.”
Mergers and acquisitions activity is heating up in the beauty industry. On Wednesday, L’Oréal USA said it made a deal to acquire Essie Cosmetics, one of the largest independent nail polish companies in the industry. So far this spring, Avon has embarked on a mini shopping spree, buying two smaller-size brands, namely the children’s personal care line Tiny Tillia and Liz Earle Beauty Co., which manufactures the Liz Earle Naturally Active Skincare brand. For its part, P&G’s most recent beauty acquisitions include niche men’s care brands Zirh Holdings and Art of Shaving.
Taking the final spot on the mens’ portion of New York Fashion Week calendar next month will be none other than @tomford. Though he’s shown his men’s wear in New York in the past, this will mark the first time the designer has shown his men’s collection alone during New York Fashion Week: Men’s. His runway show will debut on February 6 at the Park Avenue Armory. #wwdfashion
London-based couture house @ralphandrusso has certainly been in the spotlight, having its dresses worn by @beyonce, Angelina Jolie, Meghan Markle in her engagement photos and more. For couture, Tamara Ralph focused on ornamentation — think: feathers with chain mail, jet embroidery and clusters of pearls and crystals. See the rest of the collection on WWD.com #wwdfashion #couture (📷: @giovanni_giannoni_photo)
Minnie Mouse celebrated her 90th birthday by getting her own star on the Hollywood Walk of Fame. For her celebratory luncheon, @coach’s creative director @stuartvevers dressed her in a custom made prairie dress, complete with Vever’s take on the polka dot – black sequined versions – under a cropped motorcycle jacket. The designer also put his own mark on Minnie’s classic red shoes, infusing the color with sparkles and adding some Coach crystals. “We chose colors that were very Minnie and also represented quintessential Coach elements,” said Vevers. #wwdfashion #nationalpolkadotday (📷: George Chinsee)
@nickjonas is unveiling his first-ever apparel collection through a partnership with John Varvatos. The limited-edition capsule, which makes its debut in spring, also marks the first time the designer has collaborated with anyone on a line. “The process in working with Nick is amazing. It’s inspiring to be around someone who is not only connected with the trade that they do, but also with what’s happening in the environment around him, and how that connects to what we do with style,” said Varvatos. (RG: @johnvarvatos) #wwdfashion
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)