Private equity firm Castanea Partners, owner of Betsey Johnson, has added another colorful brand to its portfolio with the purchase of a controlling interest in Urban Decay Cosmetics for an undisclosed amount.

This story first appeared in the March 30, 2009 issue of WWD. Subscribe Today.

Castanea Partners is acquiring Urban Decay from duty free operator the Falic Group, which bought Newport Beach, Calif.-based Urban Decay from LVMH Moët Hennessy Louis Vuitton in 2002. Neither Urban Decay nor Castanea would discuss the brand’s sales, but Urban Decay general manager Tim Warner told WWD in 2007 that the brand was on pace to hit $100 million in global revenues that year.

“We’ve been on the lookout for an appropriate opportunity in the beauty space, particularly in the prestige segment,” said Robert Smith, co-managing partner of Newton, Mass.-based Castanea and former co-chief executive officer of the Neiman Marcus Group Inc. “When Urban Decay came along, we were attracted to it for a few reasons: one, it is a very distinctive brand and a leader in its category serving an edgier, younger customer and, two, it is really concentrated on building retail partnerships with its specialty retailers.”

Warner, executive creative director Wende Zomnir, and worldwide retail director and international makeup artist Eric Jimenez are staying on board in their current positions. Zomnir founded Urban Decay in 1996 with David Soward and Sandy Lerner, co-founder of Cisco Systems. Urban Decay was sold to LVMH in 2000.

“Personality wise, it was a good fit,” Zomnir said of Castanea. “They are not there to change our business, but to let us continue to do what we do successfully. We all agreed on the strategy for the brand, and we felt that there was a meeting of the minds. It is building our existing accounts and growing in a controlled way and focusing on retail sales.”

Urban Decay closed 2008 with 630 doors in the U.S., including Ulta, Sephora and Macy’s, and domestic sales were up by 56 percent compared with the prior year. At the end of 2008, Urban Decay was carried in 836 international doors and international sales increased by 36 percent from 2007. Although Smith wouldn’t disclose the exact percentage of international sales, he revealed they are not a majority, but a “significant piece of the business.”

“The fact that it has success and appeal globally was an important factor in us thinking about the business,” said Smith. “There is no debt on the company. It is nicely profitable, so it can invest in its own growth. In order to make those [Castanea] investments pay out, you need to expect significant growth, and we have confidence that there can be significant growth.”

Urban Decay has an assortment of more than 300 stockkeeping units, and the eye product category is the brand’s largest. Summer releases include $28 Midnight Cowboy Shimmer Body Lotion, $28 Get Baked Eye Shadow Palette, $22 Skyscraper Multi-Benefit Mascara and $18 Pocket Rocket Lip Gloss, a product that shows off Urban Decay’s fun side with photos of males in various states of dress.

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