The mass market may soon have a new powerhouse in the beauty aisle: a company that combines the strength of Markwins International Corp.’s value offering with Physicians Formula’s premium-priced brand of problem-solution cosmetics.

This story first appeared in the September 28, 2012 issue of WWD. Subscribe Today.

The two companies have signed a definitive merger agreement under which Markwins will acquire outstanding shares of Physicians’ common stock for $4.90 a share, or nearly $75 million.

That’s a 15.3 percent premium to an offer that Physicians received in August from the private equity firm Swander Pace Capital of $4.25 a share, or about $65 million, which the company initially accepted. Physicians is now required to pay a termination fee of nearly $1.3 million to Swander.

Physicians’ board unanimously approved the agreement with Markwins, and plans to recommend that shareholders vote in favor of the deal, which is expected to close later this year. Physicians and Markwins are based about 10 miles apart in Southern California, in Azusa and City of Industry, respectively. The Physicians management team will remain intact and assume senior leadership posts at Markwins said Bill George, president and chief operating officer of Markwins. He added, “We have no plans to make material changes in management” or staff.

George said, “We’ve long been admirers of the brand.…The company brings a rich, long-standing history of innovative beauty solutions, a deep management team, and it is — like Markwins — a high-growth organization that sees great hope in international [expansion].”

Physicians chairwoman and chief executive officer Ingrid Jackel stated, “Markwins and Physicians Formula sell noncompeting brands in similar channels. Combining the resources and experience of both companies will strengthen the combined portfolio of brands.”

Physicians brings a more premium offering to Markwins’ mass-market cosmetics business, which includes Wet ‘n’ Wild and value-price kits under its home brands, such as The Color Workshop, and licenses, including Barbie and Disney Princess.

In addition to creating a new price tier, Physicians’ also offers a well-developed sales and marketing team in the U.S. market, said retailers who nodded to Jackel’s prowess as product developer. Markwins, for its part, offers a global distribution and manufacturing network. Markwins also is riding high on the growth of Wet ‘n’ Wild. The brand’s sales have surged 26.3 percent year-to-date, and grown double digits for the past 22 months, said George. Markwins’ brands are sold in more than 60 countries. Physicians has been eyeing international expansion for some time, but has moved slowly on that front.

Last year, it expanded beyond North America to Mexico, Turkey, Trinidad, El Salvador and Panama. During an interview with WWD earlier this year, Jackel said Physicians’ international business accounts for 13 percent of the company’s sales, which in 2011 totaled $80.9 million. She added that growth in Latin America would continue be a focus in 2012, and that Europe was next on deck for the company. With Markwins as a parent company, Physicians’ international footprint could expand much more rapidly, said industry observers.

“Physicians is a good trademark, maybe it could translate to China and other markets,” said industry consultant Allan Mottus.