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The Hut Group Swoops on Professional Skin-care Retailer Dermstore.com

THG has paid $350 million in cash for the U.S. retailer of prestige skin-care and specialty beauty brands.

LONDON — England’s The Hut Group has snapped up specialist skin-care retailer Dermstore.com for $350 million in cash, adding to its burgeoning portfolio of U.S. and international beauty brands.

THG, which purchased Dermstore from Target Corp., described the company as “the number-one pure-play online retailer in the U.S. of prestige skin-care and specialty beauty brands.” The deal is subject to regulatory approval in the U.S., which is expected in late January.

THG, which listed on the London Stock Exchange earlier this year, said Dermstore will contribute to 11 months of THG’s 2021 financial year, adding sales of around $180 million and adjusted earnings before interest, taxes, depreciation and amortization of approximately $4 million.

Through delivery of planned synergies, management said it expects adjusted EBITDA margins to increase “and move in line with group adjusted EBITDA margins” within 18 to 24 months’ post acquisition.

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The dermatologist Craig A. Kraffert founded Dermstore in 1999 with the aim of making professional-grade skin care accessible to everybody. The site offers curated content, and is considered a destination for professional skin-care brands.

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The site expanded beyond skin care in 2008, and also offers hair care and cosmetics. It was acquired by Target Corp. in 2013.

THG said it purchased Dermstore as part of its quest to become “the global digital partner of choice across the beauty industry, powering channel shift from off-line to online.”

Matthew Moulding, chairman and chief executive officer of THG, said a key driver behind his decision to list THG on the London Stock Exchange “was to enable the group to make major global investments, such as Dermstore.com. Accessing capital through a London listing has enabled us to accelerate our growth plans and build out a global leadership position within the exciting beauty industry.”

He added that the Dermstore.com acquisition will “substantially enhance THG’s relationships with key global beauty brands. THG will be able to increase the scale of its beauty box business by accessing the Dermstore.com customer base, which will in turn unlock incremental marketing revenue.”

The Hut Group is the owner of the multibrand beauty distributors Lookfantastic.com, and Glossybox.com, and owns brands including Perricone MD, ESPA, Illamasqua, Eyeko, Mio Skincare and Ameliorate.

It also builds end-to-end web sites and manages distribution for third parties through its Ingenuity platform. THG operates a sports nutrition and wellness business, too, with Myprotein the flagship brand.

Separately, THG said it has also purchased two of its long-standing U.K.-based nutrition product suppliers, Claremont Ingredients Ltd. and David Berryman Ltd. for a combined purchase price of 59.5 million pounds, payable in cash.

Claremont is a flavor manufacturing and development laboratory for sports nutrition and beverages. Berryman’s is a fruit-based ingredients specialist, with “significant canning and bottling capabilities,” THG said.

 “THG is committed to investing in and building best-in-class product innovation and manufacturing facilities in support of its THG Nutrition portfolio of global, digital-first brands including Myprotein, Myvegan, Myvitamins, Exante and Command. These acquisitions reflect a continuation of this vertical integration strategy, and will transform its speed to market and level of product innovation in its performance nutrition brands,” the company said.

THG said both Claremont and Berryman’s would continue to generate revenue from third-party customers, while the two manufacturers’ additional facilities “will broaden the range of products that the group can manufacture for its THG Ingenuity clients, providing an opportunity for brands to add THG-developed and manufactured nutrition products to their online d-t-c web sites.”

The two manufacturing businesses “are highly complementary, with Berryman’s accelerating our capabilities in drinks range development. Claremont will play a key role in developing flavors tailored to local tastes across the globe,” the company said. “Together, these acquisitions will enable THG to accelerate the launch of further product innovation to global markets, while increasing the proportion of THG Nutrition products wholly manufactured in-house.”