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Behind Glansaol’s Bankruptcy

Court papers show that behind the scenes, Glansaol struggled to integrate its three beauty brands.

Warburg Pincus-backed Glansaol has plans to sell its three brands, Laura Geller, Julep and Clark’s Botanicals, for $16.2 million as part of its bankruptcy process.

The proposed buyer is AS Beauty, a business started by the Shamah family, which founded E.L.F. Beauty, and the Azrak family, which previously ran and sold a pajama business.

Court papers show that as the stalking-horse bidder, AS Beauty is prepared to pay slightly more than $16.2 million to take over the three brands.

“AS Beauty really values the opportunity to be able to manage three prestige brands that have a lot of runway for growth in their current distribution channels, and being able to run [prestige brands] with a lot of the operational efficiencies we’ve had from the previous companies we’ve run,” Joey Shamah told WWD Thursday.

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In court documents, Glansaol is asking the court to approve AS Beauty as the stalking-horse bidder. The company is also asking for approval of its debtor-in-possession loan from pre-petition lender SunTrust bank, as well as other procedural motions.

Glansaol filed for Chapter 11 bankruptcy protection in the Southern District of New York Dec. 19. The business listed between $10 million and $50 million in assets and liabilities in court papers, and in court papers, unveiled how the company’s plan to build the next big beauty platform went awry.

In 2015, private equity firm Warburg Pincus teamed with former Revlon chief executive officer Alan Ennis to look for beauty deals. The first investments were made in 2016, when Ennis and Warburg bought three companies around the same time — Laura Geller, Julep and Clark’s Botanicals — which were combined into one operation, called Glansaol. In the Gaelic language, Glansaol means “pure life” (Ennis is Irish).

At that point, the idea was that Ennis and Warburg would identify other beauty companies and build a multibrand prestige beauty platform that could potentially be taken to the public markets. Companies would sell outright to Glansaol, with founders and executives reinvesting in the parent company, Ennis told WWD in 2016.

The plan was for the companies to share back-end operations, but court papers show that never actually happened.

“The cost savings attributed to synergies, which had been a pillar of the debtor’s original business model, were never realized,” Glansaol ceo Nancy Bernardini said in court papers.

Bernardini joined Glansaol in April, and Ennis was moved into a role as chairman at that time. The business has also had brand-level turnover, with Elana Drell Szyfer, who was Laura Geller’s ceo, leaving the business in 2017. Sources said Jane Park, the founder and ceo of Julep, has plans to leave the business by the end of the year.

Glansaol said in court papers that its brands were struggling with increased competition that led to an excess of inventory. The company blamed a downturn in both brick-and-mortar and broadcast shopping, evolving consumer demographics and “changing trends” for its struggles. It also said that the brands had “historically relied on their major customers’ projections of future demand, which ultimately proved overly optimistic.”

Those sales dips saddled Glansaol with an oversupply, forcing the business to sell products at “steep markdowns” and even destroy certain products, according to court papers. It also caused a spike in warehousing and logistics costs.

“An example of these costs is the reoccurring scenario where the debtor’s warehouse an oversupply of ‘kit’ packages intended for their customers for promotional sales, but when these products are not sold through, they need to be manually uncoupled in order to be repackaged and sold to alternate customers,” Bernardini wrote in a court filing. 

Declining sales and increasing chargebacks—when the retailer sends unsold products back to the brand at cost—caused cash flow problems behind the scenes, and Glansaol had to withdraw from its revolving credit facility to stay afloat.

Midway through 2018, Glansaol hired Financo to explore strategic options for the business. The firm approached more than 300 potential buyers. Fifty of them signed confidentiality agreements, and nine conducted due diligence. Then, they all dropped out, the company said in court filings.

It was then that Glansaol started weighing a Chapter 11 filing, according to papers. With Emerald Capital Advisors, its financial adviser, it re-approached the nine finalists. AS Beauty emerged as the lead bidder, and Glansaol sought bankruptcy protection.

The company is asking for a Jan. 25 bid deadline, Jan. 29 auction and Jan. 31 auction.