LVHM, L’Oréal, and Shiseido are among those interested in buying business

01/31/2023

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Aesop’s market capitalization of $2 billion is higher than expected, according to a report by Citi — Foto: Silvia Costanti/Valor

Natura has started receiving preliminary consultations for the purchase of a stake in Aesop, a luxury brand of the Brazilian cosmetics giant, sources say. Bloomberg reported earlier that French group LVMH, L’Oréal, and Japan’s Shiseido were among those interested in a transaction that would value Aesop at around $2 billion.

Sources familiar with the matter heard by Valor confirmed the interest of competitors in the Brazilian company’s brand and said that L’Occitane and private equity funds, such as CVC Partners, were also interested in the financial data of Aesop, a brand founded in Australia and acquired by Natura in 2013. The Brazilian company is exploring the sale of a stake or 100% of the brand, depending on the proposals on the table.

Aesop’s market capitalization of $2 billion is higher than expected, according to a report by Citi. The bank’s analysts say this value implies a multiple of 16.5 times EBITDA, which would be positive for Natura if the stake were sold at this price. The bank points out that the sale of a 25% stake on these terms would reduce the company’s leverage to a ratio of 2 times net debt-to-EBITDA from 2.9 times.

Citi has a neutral recommendation on Natura &Co, with a price target of $13. On Monday, Natura shares closed up 5.49% at R$13.65, driven by the interest of competitors in Aesop. Over the year, the shares have gained 17.5%. Over 12 months, however, the shares fell 36.1%, according to Valor Data. Natura has a market capitalization of R$18.8 billion.

There is still no formal proposal for the business, people familiar with the matter say. Initially, Natura intended to do the brand split or even an IPO. Market conditions are not yet favorable for going public.

The Brazilian company is being advised by Bank of America and Morgan Stanley. The banks are exploring what should be the best financial arrangement to give greater liquidity to the Brazilian company, which announced last year a broad restructuring of its business.

In June last year, Natura changed the command of the group to turn around its business after reporting bad results and see stocks plummet during the pandemic. Fábio Barbosa, an executive who was already a member of the board of directors, has replaced Roberto Marques as CEO of Natura & Co.

Invited by the main stockholders of the group, Mr. Barbosa has taken the mission to simplify the holding structure, improve the margins and the company’s results, and reposition the brands Aesop, Avon, Natura, and The Body Shop.

In the third quarter, the company’s net revenue totaled R$9 billion, down 5.7% year-over-year. In the period, the holding company reported a loss attributable to the controlling shareholders of R$560 million, reversing the profit of R$273 million in the third quarter of last year. The Aesop brand’s invoicing grew 21.5%, ending the third quarter at R$602.6 million.

In a recent interview with the Financial Times, Mr. Barbosa said that the company will focus on margins and cash generation rather than sales growth. The group’s expansion movement has also ceased. The management has been reviewing Natura’s business model and its presence in underperforming markets.

The company is working to make the integration of Natura and Avon in Latin America, a movement that was already demanded by the financial market.

Natura, LVMH, L’Oréal, and Shisheido declined to comment on the matter. CVC Partners and L’Occitane did not immediately reply to requests for comment.

(Felipe Laurence contributed to this story.)

*By Monica Scaramuzzo — São Paulo

Source: Valor International

https://valorinternational.globo.com/