IPSY has agreed to buy Miami-based rival BoxyCharm Inc., merging the top two beauty subscription services in a $500 million deal.

WHO: BoxyCharm was founded by Joe Martin in 2013 with $500,000 in profits from the first business he started in 2004 with $375 when he was a college student. The monthly subscription service offers full-sized, brand-name beauty products with a retail value of over $100.

IPSY was founded in 2011 by YouTube celebrity Michelle Phan, along with Jennifer Goldfarb and Marcelo Camberos, reaching profitability within its first six months. It used social media influencers to attract new members when the trend began.

WHY: The merger could help both better navigate an uncertain market. They will be able to reach a broader demographic of subscribers and expand the brands of products within their boxes.

IN THEIR OWN WORDS: “Both brands share a commitment to celebrating diversity and enabling inclusion through beauty, which our world needs more than ever today,” said IPSY Chief Executive Officer Marcelo Camberos in a statement. “Joe has built an amazing business and an avid community of beauty enthusiasts. BoxyCharm has always pushed us to be better and now that we’re under one roof, we’re looking forward to growing and innovating together.”

“For us, it’s about really just creating an undisputed leader in subscription, where we have such a large percentage of the market,” Camberos told Bloomberg.

The merger will help IPSY and BoxyCharm boost their share of the broader beauty subscription market, Scott Stanford, an IPSY board member and Acme Capital partner, said in an interview with Bloomberg. Ipsy and BoxyCharm have chased different demographics, with BoxyCharm focused on high-end customers.”

DETAILS:

• IPSY has agreed to buy BoxyCharm. Terms of the deal weren’t disclosed.
• The deal values BoxyCharm at around $500 million paid for mostly in stock, people familiar with the matter told Bloomberg.
• IPSY, BoxyCharm, and IPSY’s brand incubator Madeby Collective, will all operate separately in a merged company called Beauty For All (BFA) Industries.
• IPSY Chief Executive Officer Marcelo Camberos will lead the new company.
• Joe Martin, BoxyCharm’s founder, will continue to lead the brand and will also join the BFAI board as a co-founder.
• Jennifer Goldfarb, IPSY co-founder, will also become BFAI chairwoman and co-founder.
• The merger will create a combined business with more than 4.3 million subscribers and $1 billion in revenue this year, according to the company.
• IPSY said it’s seen “steady month-over-month growth” in 2020 across categories.
• BoxyCharm has over 1 million subscribers and hit $137 million in revenue in 2018, sales of approximately $250 million in 2019, and is on track to hit $500 million in annual sales in 2020.
• The combined company could go public in the next 18 months.
• IPSY is backed by investment firm TPG, surpassed $500 million in revenue last year, and is profitable.
• IPSY was valued at $800 million in a funding round five years ago and has raised about $100 million to date, according to PitchBook.
• In 2017 private investment firm KarpReilly took a majority stake in BoxyCharm.
• The merged company will launch another subscription, Refreshments, that will provide “clean essentials” like face wipes, hand cream, body cream, and body wash. The business will be managed by IPSY President Fernando Madeira and managed by Sabeen Mian as Senior Vice President.
• Going forward, the collective business will be focused on personalizing experiences using member data and machine learning, merchandising third-party brands, developing fast-to-market products informed by member data, engaging the content-creation community, and investing in leadership, technology, operations, and customer service.
• Morgan Stanley advised BoxyCharm on the deal.