Shiseido confirmed it is in conversations with CVC Asia Pacific to divest its personal care business to shift focus on premium beauty products after Bloomberg reported on the potential ¥150 billion to ¥200 billion ($1.45 billion to $1.9 billion) deal. The new company saw shares jump as much as 6.5% in Tokyo on Friday, the biggest intraday climb since November.
According to Bloomberg, the non-core holdings represented approximately a tenth of Shiseido’s revenue in 2019, with annual sales of about 100 billion yen, and include haircare brand Tsubaki with distribution primarily in Japan, China, and other parts of Asia. Shiseido and CVC also are in discussions regarding subsequent joint management of the business, with the Japanese company becoming a shareholder of the entity.
“In order to maximize the potential of the business and further grow the brands in this competitive market, we need to make concentrated investments in product development and advertising,” Shiseido said. “In order to build the new business model that makes this possible, we are investigating various cases. However, no formal decisions have been made as of yet.”
“The company has been promoting its Prestige First Strategy and will continue to strengthen efforts in this core business with the aim of becoming a ‘premium skin beauty company’ utilizing digital technology and centered on the prestige/premium beauty area,” the company continued. “We aim to be the world’s number-one company in this area by 2030.”
Japan’s largest beauty company said the deal could take place around the first half of 2021, and that the business would then be managed jointly.
In November 2020, Shiseido lowered its fiscal year 2020 sales forecast over the delayed recovery in its key markets hit by the coronavirus pandemic. For 2020, Shiseido’s latest fiscal year, the company is projected to post an operating loss of 4.7 billion yen, compared with a profit of 114 billion yen a year earlier, according to the average of analysts’ estimates compiled by Bloomberg. Revenue is predicted to decline by 19% to 917 billion yen. Shiseido is set to report results on February 9.
CVC Capital Partners’ portfolio includes investments in Douglas and PDC Brands.
Photo: via Shiseido