Merger Market
The Estee Lauder Companies (NYSE:EL), the New York City-based provider of skin care, makeup, fragrance and hair care products, is open to the prospect of more acquisitions and is ramping up its growth in areas including Turkey and China, executives said Monday.
In her prepared remarks on the 4Q15 earnings call, CFO Tracey Travis said the company’s strategic view of opportunities was unchanged despite evolving its methods based on the previous year’s experience.
“We remain open to further acquisition opportunities and continue to target an average of 1% point of sales growth from acquisitions over the three-year time horizon,” the CFO said.
She noted that the company expected rapid expansion in emerging markets and would continue the fast growth of its makeup and luxury products. It would also expand its newest brands. Travis noted that Estee Lauder had used USD 241m for acquisitions in the fiscal year.
CEO Fabrizio Freda outlined the company’s expansion plans in his prepared remarks, describing the emerging markets as a “major growth engine,” with the region expecting to be one of Estee Lauder’s best growth drivers.
“As a result, we are accelerating our expansion in key countries such as Turkey where we are building on our growth and adding seven new freestanding retail store(s) for MAC, Clinique, Bobbi Brown and Jo Malone in the first quarter alone,” Freda continued. “In China, we also plan to continue strengthening our brand portfolio as well as accelerate our makeup and fragrance business.”
Recent efforts
After staying quiet on the M&A front from mid-2010, Estee Lauder announced four acquisitions in calendar year 2014.
As reported by this news service, the company indicated its willingness to make acquisitions on the 4Q14 earnings call held last August. At that time, CFO Travis said M&A was a high priority for Estee Lauder and it had a lot of activity going on in terms of acquisition opportunities.
CEO Freda said on last year’s call that the company’s overall M&A strategy was focused on acquiring medium-sized brands with global potential that it could grow over time, citing its MAC brand as an example of the ideal strategy.
Estee Lauder subsequently bought New York-based body care products retailer Le Labo, New York-based skin care oils company RODIN olio lusso, France-based luxury perfumes business Editions de Parfums Frederic Malle and California-based mud mask beauty products company GlamGlow. Terms of the deals were not disclosed.
Moelis was used for GlamGlow, Estee Lauder’s most recent acquisition, as well as the USD 256m purchase of Smashbox Beauty Cosmetics in 2010. BNP Paribas advised on Editions de Parfums and Le Labo. Wragge Lawrence Graham & Co was also used for the latter two transactions, while Lowenstein Sandler was used for all four of last year’s buys.
The company used Weil, Gotshal & Manges on Smashbox and multiple earlier buys, as well as other corporate matters. Estee Lauder’s SVP Deputy General Counsel Spencer Smul was previously an attorney with the firm.
Estee Lauder has a market capitalization of USD 31.3bn.