TOKYO — Shiseido Co. Ltd. expects Bare Escentuals to be back on the growth track soon.

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Revealing details of its $1.7 billion bid for the U.S. mineral-based cosmetics brand, Shiseido president and chief executive officer Shinzo Maeda admitted Bare Escentuals’ sales have dipped recently because of the economic downturn, but stressed he expects them to begin growing again in the near future. To illustrate the potential of the deal, Shiseido combined its balance sheet for the fiscal year ending March 30 with that of Bare Escentuals ending Dec. 31, 2008, to give a rough estimate of what the two companies, fully integrated, would look like. Shiseido said its annual sales would be about 747.8 billion yen, or $8.17 billion at current exchange, compared with the 690.3 billion yen, or $7.55 billion, it posted in its most recent fiscal year.

The Japanese company’s portion of its sales generated in North America would rise to 14 percent from 8 percent, and its reliance on its core home market of Japan would decrease. Shiseido, like many other Japanese beauty and retail players, has suffered in recent years as the country’s aging population shrinks and its economic woes entice consumers to cut back on shopping. Shiseido said sales outside Japan would increase to about 42 percent of the total from 38 percent right now.

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“This [acquisition] will actually help us to grow globally,” Maeda said.

Maeda reiterated Shiseido’s long-term target to surpass 1 trillion yen, or $10.93 billion, in sales, more than half of it generated internationally, by 2017. He said the company would consider other potential acquisitions if it finds an appropriate target, but it doesn’t have anything specific planned at this time.

Shiseido saw its shares climb 5 percent on Friday on news of the deal. On Monday, Shiseido shares declined 0.74 percent, or 15 yen, from Friday to close at 2025 yen, or $22.30 on the Tokyo stock exchange.

However, Standard & Poor’s Rating Services expressed concern with Shiseido’s financing of the deal, placing the company’s A+ long-term corporate credit ratings on credit watch with negative implications. But S&P added that Shiseido’s cash flow generating ability and overall liquidity would limit any potential downgrade to one notch.

“Shiseido’s financial soundness is likely to deteriorate as the company plans to finance most of the acquisition costs with debt,” the agency said.

As reported, Shiseido said it is offering $18.20 share for the California-based company. Shiseido will spend an estimated $1.7 billion if all of Bare Escentuals’ shareholders tender their shares, but the total cost of the deal will actually swell to $1.9 billion once Shiseido assumes the American company’s debts, Shiseido executives said Friday at a press conference.

Maeda said the deal is part of the company’s broader strategy to become a global beauty player and both parties stand to gain. Shiseido would acquire a larger presence in North America, its smallest market at the moment, as well as Bare Escentuals’ expertise in television and Internet sales, he said. Meanwhile, Shiseido plans to use its large retail infrastructure in Asia and its skin care know-how to broaden the American brand’s geographic reach and product offering.

“We can nurture each other’s brand mutually,” he said, adding that Bare Escentuals ceo Leslie Blodgett would continue to manage the company as a Shiseido subsidiary.

Shiseido is offering Bare Escentuals shareholders a 40.8 percent premium over the stock’s average price during the last three months, and a 39.9 percent premium over the closing price Wednesday. On Friday, Bare Escentuals’ stock closed at $18.07, up 42 percent. Maeda said the price is justified, given Bare Escentuals’ growth prospects and double-digit profit margins.

Shiseido plans to start its offer within the next couple weeks. It said it is financing the deal with cash and cash equivalents of 30 billion yen, or $327.92 million, and a bank bridge loan of 150 billion yen, or $1.64 billion.

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