L'Oréal Looks to Gain U.S. Share by Buying Valeant Brands

By Nick Kostov 

PARIS-- L'Oréal SA plans to buy CeraVe and two other skin-care brands from Valeant Pharmaceuticals Inc. for $1.3 billion, expanding the French cosmetics firm's U.S. presence and deepening its portfolio in a product segment that has become the beauty industry's largest.

The all-cash deal will give L'Oréal the CeraVe brand, which includes cleansers, moisturizers and healing ointments, as well as the AcneFree and Ambi brands, which distribute a range of acne treatments and skin-care products.

L'Oréal, one of the world's leading cosmetics makers, said the three brands have an annualized combined revenue of around $168 million.

Companies across multiple industries--beauty, consumer goods and pharmaceuticals--are battling to stake a claim in the skin-care business, which is highly coveted because of its crossover appeal as both a medical and beauty product. In 2015, Unilever purchased four skin-care brands, including Ren and Murad, while Nestlé last year formed a joint venture with the maker of Proactiv, one of the world's top-selling acne treatments.

"What you can see in the skin-care market--in the U.S., Asia and Europe--is that people are looking for brands that are recommended by health professionals," Brigitte Liberman, president of L'Oreal's Active Cosmetics Division, said in an interview.

For nearly a decade, skin care has outgrown the wider beauty and personal-care market, according to data tracker Euromonitor International. Skin care is now the beauty industry's largest category, accounting for a quarter of the market, but growth has begun to cool in recent years.

The price paid by L'Oréal "looks high," but the deal "will clearly strengthen the position of L'Oreal's Active Cosmetics division in the U.S.," said Hermine de Bentzmann, an analyst at brokerage house Raymond James in Paris. She added that the deal would double the unit's revenue in the North American market, where it made only 12% of its sales in 2015.

L'Oréal shares fell 0.26% to EUR171.35 ($181.17) in midday trading in Paris.

CeraVe offers a range of skin-care products including cleansers, moisturizers and sunscreens, as well as a baby line. It is one of the fastest-growing skin-care brands in the U.S., averaging 20% annual growth over the past two years, L'Oréal said.

L'Oréal said the three brands would stand alongside the likes of Vichy, La Roche-Posay and SkinCeuticals in its Active Cosmetics division, which has been growing in recent quarters, boosted by strong performances in North America and Latin America.

L'Oreal's Ms. Liberman said the company would first look to increase sales of the brands in the U.S., particularly by working with dermatologists and other doctors who would recommend their products.

"Considering the importance of health--not only in cosmetics but also in food and other industries--these brands should continue to grow strongly in years to come," she said.

For Valeant, the sale is part of new Valeant Chief Executive Joseph Papa's efforts to focus the company on its key franchises by selling noncore assets or milking them for cash to pay down $30 billion in debt. [LINK: http://www.wsj.com/articles/

William Horobin contributed to this article.

Write to Nick Kostov at [e-mail]

(END) Dow Jones Newswires

January 10, 2017 08:23 ET (13:23 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.