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Analysts Give Thumbs-up to Latest L’Oréal Acquisitions

The beauty giant said it will purchase Logocos Naturkosmetik and Société des Thermes de La Roche-Posay.

PARIS — After recently snapping up Valentino, Pulp Riot and Nanda Co. Ltd., L’Oréal continues on its acquisition spree. On Wednesday morning, the group said it has signed an agreement to buy German natural beauty company Logocos Naturkosmetik AG and plans to purchase the Société des Thermes de La Roche-Posay.

Financial terms of the agreements were not disclosed.

Analysts applauded both buys. “The German deal is interesting, since natural is the flavor of the day and fast-growing, although this is a very small deal at the scale of L’Oréal. And we have yet to see real progress with the Sanoflore brand, the other small natural brand they acquired, although that obviously sits in a different part of the business,” said Eva Quiroga, an analyst at Deutsche Bank.

She was referring to the organic beauty brand L’Oréal bought in 2006, which is now part of the group’s Active Cosmetics division, whereas Logocos Naturkosmetik is to join the Consumer Products division.

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“Although small, Logocos is strategically sound for L’Oréal given, [one], the firm’s limited exposure to the natural beauty segment, [and two], Garnier has lost authority in this segment. Recall that Garnier was pulled out of China and a flanker, ‘Whole Blends,’ has gained limited traction,” said Javier Escalante, an analyst at Evercore ISI. “The acquisition of a mass-priced natural brand is consistent with the [introduction] of Botanēa herbal hair color by the Professional division.”

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Logocos Naturkosmetik, based in Hanover and founded by a naturopath in 1978, is billed to have pioneered natural cosmetics with its vegan and bio-certified brands such as Logona and Sante. Their formulas contain plant extracts and natural ingredients culled from organic farms.

Last year, Logocos Naturkosmetik generated net sales of 59 million euros in Europe. L’Oréal said it plans to take the business international.

In a separate release on Wednesday morning, L’Oréal said it has submitted to the shareholders of Holding STRP, or Société des Thermes de La Roche-Posay, an irrevocable offer for the acquisition of all the shares of the company.

“The project foresees the prior carve-out of the hotel business to the current shareholders of Holding STRP and the attribution of exclusive negotiation rights to L’Oréal,” the company said.

Founded in 1921, Société des Thermes de La Roche-Posay is Europe’s first thermal station dedicated exclusively to treating dermatological diseases. In 2017, more than 7,500 patients used the thermal activity, resulting in 3.6 million euros of sales.

L’Oréal, which has owned the La Roche-Posay skin-care business since 1989, plans to make the thermal station a flagship for the brand.

“This small operation fits well with the group’s M&A policy: bolt-on acquisition to extend the brand portfolio in order to strengthen the product mix in beauty and exclusively in beauty,” Pierre Tegner, an analyst with ODDO BHF, said in a research note. “Société des Thermes will not extend the portfolio but will strengthen it.”

He added: “I see this acquisition as an investment in ‘marketing asset’ beyond the classic P&L line.”

Tegner believes the operational benefit with the purchase “is to go beyond traditional marketing investment to promote a brand.”

Société des Thermes de La Roche-Posay is the second thermal station to enter L’Oréal’s portfolio. In 2016, the group acquired Société des Thermes de Saint-Gervais-les-Bains and the license to use the Saint-Gervais Mont-Blanc beauty brand.

L’Oréal stock closed up 0.2 percent to 210 euros on the Paris bourse on Wednesday.

The company has been on the acquisition trail of late, targeting purchases for a variety of its divisions.

On June 20, L’Oréal said it had closed the deal for 100 percent of Nanda Co. Ltd.’s capital, marking the group’s first deep dive into K-beauty. The lifestyle makeup and fashion company, including the hot Stylenanda makeup range, was added to the beauty giant’s Consumer Products division.

On May 28, L’Oréal announced the signing of a long-term contract, for the creation, development and distribution of luxury perfumes and beauty products for the Valentino brand. That is to become part of the group’s luxury division starting Jan. 1.

And on May 25, L’Oréal finalized the acquisition of Pulp Riot, the professional hair-color brand with bright, bold hues that was born online. The brand is in the company’s Professional Products division.