NYX Cosmetics, which put itself on the market in March, may have found a buyer.
The indie mass-market color cosmetics brand is close to finalizing a deal with beauty giant L’Oréal, said industry sources. While nothing has been signed, a potential deal could come as early as the end of the month. NYX, which generates wholesale sales north of $100 million, could fetch as high as $500 million, suggested financial observers.
Another frontrunner for the brand is said to include TPG Growth, which earlier this year purchased the value-price mass color brand E.l.f. Cosmetics from company founders and the private equity fund TSG Consumer Partners.
The sale of NYX would accelerate the mergers and acquisition market in beauty, which has been gaining steam after a lackluster 2012. Since January, L’Oréal has acquired Chinese facial masks-maker Magic Holdings International Ltd., TPG Growth bought a majority stake in E.l.f., and Japan’s Kosé Corp. acquired a 93.5 percent stake in Tarte Cosmetics from founder Maureen Kelly and Encore Consumer Capital. This month alone, TSG sold off a trio of professional hair-care brands — Sexy Hair, Alterna and Kenra — to Henkel AG, and its clinical skin-care brand Perricone MD to Lion Capital.
Should NYX’s final price near $500 million, it would be one of the most sizable deals in the market in recent years. Although it still dwarfs in comparison to the megadeals that marked 2010, when Unilever acquired Alberto-Culver Co. for $3.7 billion, and Coty Inc. bought both Philosophy and OPI Products Inc. for roughly $1 billion apiece.
For its part, NYX, which earlier this year tapped investment bank Piper Jaffray to find a buyer, is often referred to as the “MAC of mass.” It’s attracted quite a bit of attention for its makeup-artistry positioning and social media prowess. The company, founded in 1999 by Toni Ko, has previously stated that it has recorded an average annual growth rate of almost 50 percent for the last five years.
L’Oréal has been very active on the mergers and acquisitions front in recent years, and also has shown a strong willingness to buy brands at an earlier stage, including Essie Cosmetics and Baxter of California.
It’s also had success building on the growth of edgy color brands. For instance, in 2012, L’Oréal purchased Urban Decay from private equity firm Castanea Partners for an estimated $350 million. The brand has flourished, driven in part by the success of its Naked eye-shadow palettes.