PARIS — Is the global beauty industry about to undergo a makeover?

There has been a swirl of speculation in the last few months that a series of mergers or acquisitions might occur in the near future. The speculation is being driven by the industry’s slower growth as companies struggle against less innovation, a seemingly bored consumer and weak economies worldwide.

In addition, just as their retail customers grow bigger and bigger, beauty firms increasingly need critical mass.

The latest deal occurred early this week when Wella bought Escada Beaute for an undisclosed amount. That only increased rumors about a number of other beauty companies. These include:

Beiersdorf could soon be let go by Allianz.

LVMH Moet Hennessy Louis Vuitton’s Sephora and DFS might be spun off, as reported.

Unilever PLC’s prestige beauty division could be a takeover target going forward. The division includes Calvin Klein Cosmetics and Unilever has never hidden its dissatisfaction with the division’s growth prospects.

“It could be a good time for some [acquirers] because the valuation is more attractive,” said Susanne Seibel, industry analyst at UBS Warburg in London. She added that in terms of cosmetics businesses: “We do expect further consolidation in the sector due to the fragmentation of the industry, a search for growth and brand portfolio rejuvenation.” Among manufacturers, the likelihood of Beiersdorf — owner of Nivea, Juvena and La Prairie, among other brands — undergoing a shift in majority ownership or an outright sale has been boosted by an announcement Thursday that Tchibo Holding AG, owner of 30 percent of Beiersdorf, had sold its 75.1 percent stake in cigarette maker Reemtsma. About 90 percent of the firm was spun off, representing some $4.56 billion (euro 5.2 billion), according to industry sources.

All figures are translated from the euro at current exchange rates.

“It is rumored Tchibo will soon put the money to work and buy Allianz’s 43.6 percent stake in Beiersdorf, which is worth about $4 billion,” said one industry analyst. “[Given Thursday’s news], this is probably the most likely scenario.”

But others, such as Michael Winkler, consumer goods analyst at WestLB Panmure, believe Allianz will sell just some of its Beiersdorf stake to Tchibo, keep a portion for its life insurance business and divest the rest to institutional investors, thus increasing the free float.

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Some industry insiders maintain both L’Oreal and Procter and Gamble are hot on Beiersdorf’s trail, and that Unilever, The Estee Lauder Cos. and Wella Group AG are showing interest in the firm as well.

Among retailers, Sephora has been rumored to be up for grabs for months. Speculation increased when LVMH publicly said its selective retail business is “noncore.” It was recently sparked again when LVMH sold its stake in Phillips auction house in mid-February, and the move was lauded by industry analysts.

With 475 doors globally, Sephora is valued at a minimum of $657.9 million (euro 750 million) on estimated sales last year of $524.6 million (euro 598 million), according to industry sources.

Possible suitors for Sephora, industry observers say, include Germany’s Douglas; Dutch health and beauty retailer Kruidvat Beheer BV, via its French perfumery chain Nocibe Parfumeries, and from France, Galeries Lafayette department store and the retailer Carrefour.

But some reckon LVMH will keep Sephora, at least for the short term. “We are expecting Sephora will do some housecleaning before LVMH sells it,” said Antoine Belge, head of luxury goods and cosmetics at ABN Amro in Paris. “We don’t expect there to be a disposal this year.”

As for DFS, which is also adrift from the LVMH core, sources believe the company could change hands soon. Lehman Bros. outlines in recent research one possible scenario, wherein DFS links up with bankrupt Swissair’s Nuance — among the world’s largest duty-free businesses.

“We are not proposing that DFS buys Nuance as we believe that this would draw an adverse reaction from investors,” the investment bank’s research concludes. “But rather, as DFS and Nuance are similar in size (around $1.65 billion and $1.23 billion in sales in 2000, respectively), we suggest that they can be combined to create a stronger overall business.”

Also among manufacturers, Unilever’s name pops up in the rumor mill not just as a possible acquirer, but as a seller of its remaining prestige beauty business, which is best known for marketing, which includes Calvin Klein, Cerruti, Lagerfeld, Chloe and Valentino. Unilever has denied an interest in selling or terminating the businesses. But some industry executives say such brands may be ripe for the picking. Who could be keen to snap them up? “Any companies with existing prestige fragrance businesses,” said an industry source.

One analyst estimates Unilever’s prestige beauty business rings up sales yearly of between $657.9 million to $701.8 million and that it could be valued at 1.5- to 2-times sales.

Of course, plenty of other names are swirling around as attractive takeover targets on both sides of the Atlantic. Among them are Reckitt Benckiser’s Coty Inc., plus Wella’s prestige beauty division, Cosmopolitan Cosmetics.

Given the tougher economic times and the industry’s struggles, analysts said most beauty companies are reevaluating their strategies to determine ways to adapt. Most believe it’s impossible to create new, large brands these days because of the investment required — while small ones find it equally difficult to survive because of retail consolidation. This means, they said, that it will be the weaker companies that go by the wayside in the near term and the stronger — and larger — ones that prosper.

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