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The cash infusion comes from a Morgan Stanley-backed private equity firm and a Chinese cosmetics distributor, paving the way for expansion into China.

A few days before 2018 begins, and the new year’s beauty deals are already under way.

Greek brand Korres has received a cash infusion of 48.3 million euro from a Morgan Stanley-managed private equity fund and a Chinese cosmetics distributor, WWD has exclusively learned. The deal is expected to close in a few weeks.

The investment comes with a new ownership structure under a holding company, Nissos Holdings. North Haven Private Equity Asia IV and Profex Inc. will own 56 percent and 14 percent of Nissos, respectively, while Giorgos Korres and members of the Korres family will own the remaining 30 percent.

To claim their shares, North Haven and Profex bought out all shareholders outside the Korres family, including former Johnson & Johnson executive Pericles Stamatiades and Greek magnate Dimitris Daskalopoulos’ Damma Holdings.

As WWD reported last year, Korres had been one of many beauty brands weighing the possibility of a transaction. The new deal, said Korres founder and chairman Giorgios Korres, will allow the brand — which is growing in the U.S., Central and South America and Europe — to expand into Asia.

As part of the deal, Korres and Profex will enter into an exclusive license and supply agreement, allowing Profex to distribute Korres products in China and Hong Kong.

Korres believes that the company’s skin and body products in particular — the brand’s assortment also includes fragrance and color — will appeal to the trend-savvy Chinese consumer. Korres products boast natural ingredients, a back story rooted in a homeopathic Greek pharmacy and an apothecary-inspired package design.

“What I understand is that the consumer is growing quickly there, and they understand the [uniqueness] of different brands,” Korres said. He ticked off Korres’ peer brands that have seen success in the market. “The young Chinese girls know all the brands that exist. Look at brands like Kiehl’s, like Caudalie — how quickly they grow in China….Fresh is doing amazingly well.”

Industry sources say Korres does about 100 million euros in annual retail sales, which does not include its business in Central and South America done through a distribution partnership with Avon. That business has grown significantly since Avon and Korres entered their strategic partnership — jumping from about eight million euros in 2014 to a projected 35 million euros to 40 million euros this year, according to industry sources. “They respond to the authenticity of the brand,” said Korres of the Latin American consumer. Fragrance, skin and body care all sell well in that market.

In the U.S., launches such as the Wild Rose skin-care range, the Pure Greek Olive collection — an exclusive body-care line for HSN — and the Black Pine Super Eye Serum, a lifting and firming eye pen, have helped sales spike in the past year. Industry sources say the brand does about $15 million in the U.S., and Korres said he has plans to boost sales and brand awareness further by opening stand-alone retail in the region in 2019. The first Korres pharmacy store, which will be an experiential retail play, is set to open in Athens in early 2018.

“My dream is to continue to work — the intention is not to sell,” Korres said of the deal.

He said the brand will continue to focus on product launches in the next few years, with a strong product innovation pipeline set through 2021, as well as international expansion and strengthening its existing markets in Europe and the U.K. — including Germany, France, Norway and Spain.

Beauty deals, particularly for skin and hair-care brands, are expected to continue their momentum in 2018.

“You saw a lot more skin care and you started to see some hair-care [deals] in 2017,” Steve Davis, managing director at Intrepid Investors, told WWD in an interview earlier this month. “You’ll see some of that shift [continue into 2018], there are some interesting color cosmetics brands out there, but the list is shorter.”

Authorities in Tehran will no longer arrest people for breaches of Islamic codes, the Iranian capital’s police chief said Wednesday, a sign of easing social strictures under relatively moderate President Hassan Rouhani.

Echoing a similar shift in Saudi Arabia, Iran’s main regional rival, Brig. Gen. Hossein Rahimi said police would change tactics in enforcing Islamic values, after decades of fines, detentions and even lashings for infractions as minor as women wearing nail polish, heavy makeup or tying their headscarves too loosely. Iranian women have been obliged to wear headscarves in public since the Iranian Revolution in 1979, which melded government with Islam.

“Based on a society-oriented, educational approach, the police will not arrest those who don’t respect Islamic values,” Gen. Rahimi said, according to the official Islamic Republic News Agency. “It will instead educate them.”

The announcement appeared to mark a significant change in how police in Tehran address Islamic mores. But given the long and harsh history of enforcement, many Iranians responded on social media with skepticism and demands for a more precise definition of the Islamic values that won’t result in arrests. “They’re probably short of detention cells,” one Iranian tweeted.

Others cheered the shift. “Education instead of detention. This is a victory for women!” tweeted one man identifying himself as Masoud Razi. “People, know your power.”

Some observers say the true measure of Tehran’s intent will be in its execution of the announced looser stance, noting that Iranian leaders, including Mr. Rouhani, have articulated relaxations of enforcement in the past without following through. Mr. Rouhani in 2015 told a gathering of police officials that enforcing Islamic law wasn’t their job, but arrests of people for infractions relating to Islamic values didn’t stop.

Police in Tehran arrested more than 200 people last week for violating Islamic values by allegedly dancing and drinking in celebration of the winter solstice, the shortest day of the year.

Behnam Ben Taleblu, a senior Iran analyst at the Foundation for Defense of Democracies in Washington, said Wednesday’s announcement was based on a calculation that the system needed to “bend a little without breaking” to appeal to a rising young middle class.

“The intention could be there, genuine or not, to not want to enforce a strict interpretation of Islamic law in Iran,” he said. “But even those who harbor a genuine desire for reform have often lacked the political capability to follow through.”

The announced move is in line with a liberalization taking place in some other parts of the Middle East, including in Sunni-dominated Saudi Arabia, Shiite Iran’s main adversary for regional influence and power. Saudi authorities last year stripped religious police of their power to arrest people. King Salman decreed in September that women be allowed to drive starting next year, and a decadeslong ban on cinemas was lifted earlier this month. Those actions have been popular domestically, especially among the kingdom’s large population of young people.

In some other majority-Muslim states, meanwhile, calls for stricter rules protecting Islamic sensibilities are growing. Religious activists besieged Pakistan’s capital late last month and secured promises from the government to more strictly implement anti-blasphemy laws. In Indonesia, the world’s most populous Islamic country, hard-line Islamic groups are promoting new, Shariah-based laws, backed by a popular mood that has become more religiously conservative.

In Iran, the Islamic Revolutionary Guard Corps was responsible for enforcing Islamic values in the early years after the revolution. That role was later taken over by the police, who patrolled Tehran in vans and watched for violations in public squares, shopping centers and other highly trafficked areas.

Young Iranians in particular have pushed fiercely for a relaxation of rules on headscarves and other appearance-related restrictions in recent years. Their votes helped propel Mr. Rouhani into office in 2013 and to a second four-year term in an election in May. About 40% of Iran’s population of roughly 82 million is under 25 years old.

“The morality police is simply unable to contain and control the vibrant Iranian youth, which is generally more liberal and secular than the previous generation,” said Ali Vaez, the Iran Project director at the International Crisis Group.

He suggested it was no coincidence that the move in the capital comes as Iran faces mounting political challenges from abroad. U.S. President Donald Trump’s administration has slapped new sanctions on Iranians connected to the country’s ballistic-missile program, which the U.S. and its allies see as a threat to Israel. Mr. Trump has also refused to certify Iran’s compliance with the terms of its Obama-era nuclear deal, which gave it relief from international sanctions that had hampered its economy.

“The Rouhani administration understands that the less discontent there is within the society, the less security risks Iran would face at home amidst more pressure from the Trump administration,” Mr. Vaez said.

Iranians have become more daring, and increasingly Western, in their wardrobe choices, and the state has until now shown little willingness to bend in response. Just last year, Tehran’s then police chief, Brig. Gen. Hossein Sajedinia, announced the deployment of 7,000 undercover morality police. Numerous female models were later arrested for posing on Instagram without headscarves, according to local media reports, as police launched a new initiative to enforce dress codes beyond the street.

Gen. Rahimi took over as police chief in August, around the same time Tehran’s city council elected a reformist mayor, Mohammad Ali Najafi, to succeed a series of two hard-liners. The mayor, however, has no oversight over Tehran’s police, which report to the Ministry of Interior. It wasn’t clear what role, if any, Mr. Rouhani had in the relaxation of enforcement under Gen. Rahimi.

Gen. Rahimi said the police had already held 121 educational sessions for almost 8,000 people, but didn’t say which Islamic values they were alleged to have violated.

Cevian Capital has just sold Volvo Group to a Chinese company for €3.25bn

Brexit is making the UK more attractive to investors by depressing valuations, according to Europe’s largest activist shareholder, flush with cash from the sector’s biggest-ever exit.

Cevian Capital, the Swedish pioneer of activism in Europe, sold its 8 per cent stake in truckmaker Volvo Group to Zhejiang Geely of China on Wednesday for €3.25bn.

Christer Gardell, Cevian’s co-founder, told the Financial Times that the fund would be looking to reinvest the €2bn in profits it made either in new targets in northern Europe or in existing holdings that include companies such as steelmaker ThyssenKrupp, engineering group ABB and UK insurer RSA.

“We really like the UK market. We like the corporate governance, the rational behaviour of corporate boards. For us, Brexit is probably more a positive than a negative. Investors tend to exaggerate the threat,” Mr Gardell said.

The Volvo Group stake sale is a vindication for the activist strategy of Cevian. Founded 15 years ago, Cevian tends to take a longer-term approach than many of the US activists, typically holding stakes of 5-20 per cent for five to seven years. It owned Volvo Group for 11 years and made much of its money in the past 18 months due to a turnround initiated by a new chief executive.

Mr Gardell said of the deal to sell to Geely, which also owns all of Volvo Cars (itself spun out of Volvo Group in 1999): “It’s an important transaction for our business. It shows the value of a large minority position as well. It’s good to show we can do a transaction like this after so many years.”

Cevian estimates that its return from its Volvo Group stake is more than double the market return over the past 11 years. Volvo Group’s share price has more than doubled since the start of 2016, outpacing a rise of about 20 per cent for the main Stockholm stock index over the same period.

Mr Gardell said the deal gave Cevian a “war chest”. He added: “We are currently buying into one other company. The money will be invested. We have a good pipeline of existing opportunities and we will also consider whether to increase in current holdings.”

Cevian started off in the Nordic region, but has expanded to Germany, Switzerland, the UK and France. It has avoided southern Europe, arguing that it is not comfortable with corporate governance standards there.

Speculation about a possible reunion between Volvo Group and Volvo Cars under Geely is particularly ironic for Cevian, which has concentrated in recent years on breaking up conglomerates.

“The elimination of conglomerates is something that will happen with an enormous force over the next five years. The mothers of all conglomerates — Siemens and GE — are demerging. When those two companies are joining the trend, there is no way anyone else can defend conglomerate structures,” Mr Gardell added.

Group says increasing concentration of western art holdings in region offers opportunity

Following a trail of Francis Bacon and Gerhard Richter paintings into Asia, a London-based art fund is setting up in the region with plans to deploy at least $1bn over the next decade lending to collectors.

The push into Asia for The Fine Art Group, which specialises in using art as collateral for lending, comes on the back of what it calls an increasing concentration of western art holdings with Asian families. The fund will open its first Asia offices in Shanghai and Hong Kong in early 2018, according to Philip Hoffman, founder and chief executive of the group.

“We see the lending capabilities easily at $1bn over the next 10 years and have the backing from investors to do this,” Mr Hoffman said.

Asia has hosted a number of record-breaking art auctions over the past five years, such as the $170m sale of Amedeo Modigliani’s oil portrait Nu couché (Reclining Nude) to Chinese tycoon Liu Yiqian in 2015. Mr Liu famously paid for the work with his American Express card.

Other pieces — by Vincent van Gogh, Francis Bacon and Jenny Saville — have been snapped up at record prices by Asia-based collectors, most of whom hail from China. Asia has also seen a rapid expansion of auction businesses such as Sotheby’s and Christie’s, which were allowed entry into China only in 2013. A Chinese company with links to Mao Zedong recently bought a stake in Sotheby’s.

Over the past five years, experts say that prices for Asian art have risen to comparable levels with western pieces, pushing many collectors in the region to shift their focus to western works.

“The mainland Chinese investors all of a sudden realised that Chinese prices were the same as western prices, and when that happened they really started buying a lot [of western art],” said Pearl Lam, owner of the eponymous galleries in Hong Kong, Shanghai and Singapore.

The shift to western art investment is one of the factors that has helped The Fine Art Group launch in Asia because western works are often easier to use as collateral. The company lends to collectors that are looking to buy high-grade western art but has also made a business of taking as collateral artworks owned by collectors in order to lend to them.

Using art as collateral for loans is not new in Asia — several private banks in the region such as Lombard Odier run similar businesses — but Mr Hoffman says that funds specialising in the business are virtually unknown in the region. Many collectors in Asia, he said, are unaware that such services exist.

“Often they have $100m tied up in art and didn’t know they could borrow against it,” Mr Hoffman said of Asian art investors. “In Asia it’s much more common for them to borrow because they have a deal they want to do.”

Asia is home to up to 40 families that hold a collective $8bn-$12bn in western artwork, with the majority of those investments being made over the past 10 years, Mr Hoffman said.

US maintains its position as most active region, with $1.4tn of deals

Worldwide mergers and acquisitions activity has exceeded $3tn for the fourth consecutive year, extending an unprecedented wave of dealmaking that bankers say is set to accelerate in 2018.

The final month of 2017 was capped by three blockbuster transactions sparked by companies taking action against the threat of disruption from the likes of Amazon, Facebook and Netflix, which are using their size and scale to push into new sectors.

Faced with the prospect of Amazon’s entry into the pharmacy business, the US’s biggest drugstore chain CVS Health agreed to acquire healthcare insurer Aetna for about $69bn. Meanwhile, Amazon’s effect on retail worldwide prompted Australia’s billionaire Lowy family to sell its global shopping centre business Westfield to France’s Unibail-Rodamco for $24.7bn.

Further encroachment by Facebook and Netflix into sports rights, media and film production led Rupert Murdoch to sell much of his 21st Century Fox empire to Disney in a $66bn deal.

The total volume of dealmaking hit $3.5tn in 2017, a 1 per cent drop from a year ago and the lowest figure since 2014, according to data from Thomson Reuters. But it also marked the fourth straight year that deal levels surpassed $3tn, a record streak.

“Most of 2017 has been a slow year for megadeals . . . We believe the momentum around large deal activity will continue into next year as we see a number of industries undergoing massive strategic shifts and further consolidation,” said Marc Nachmann, co-head of global investment banking at Goldman Sachs, which ranked as the top advisory firm by volume of deals this year.

The US bank advised Amazon on its $13.7bn acquisition of upmarket grocery chain Whole Foods, in a deal that underscored the ecommerce group’s ability to rattle an entire industry with one swift move.

Eileen Nugent, an M&A partner at Skadden, said: “Every industry is being disrupted, everyone is trying to respond to technological changes, nobody wants to be left out and that’s why many companies are buying strategic assets to better position themselves to compete on a global scale.”

The US remained the most active region, with $1.4tn of deals, though the value of M&A there fell 16 per cent from a year ago. Still, the number of US deals struck in 2017 climbed above 12,400, a record figure that was driven by a surge of transactions with a value of less than $1bn.

Dealmakers expect a fillip for M&A next year as companies plot how to take advantage of savings from President Donald Trump’s corporate tax reform bill.

Steve Baronoff, chairman of global M&A at Bank of America, and Ethan Klingsberg, a partner at law firm Cleary Gottlieb Steen & Hamilton, said that the improved economic outlook had led many companies to pursue unsolicited transactions.

The largest deal of 2017 has yet to be resolved, as Broadcom pursues a hostile $130bn bid for rival chipmaker Qualcomm. Broadcom has laid out plans to oust Qualcomm’s board in March.

In contrast to the US, European deal activity climbed 16 per cent to $856.3bn despite the largest attempt in the region — a $143bn bid by Kraft Heinz to acquire Unilever — failing early in the year.

The approach, led by private equity’s 3G Capital and a Warren Buffett-backed group, triggered a series of moves across the European consumer sector, with Unilever rushing to snap up trendy brands and unload its spreads business to KKR for €6.8bn in one of the year’s largest private equity deals. It also led activist investors to target other large companies, including Switzerland’s Nestlé and France’s Danone.

Elsewhere, Germany’s Hochtief and Italy’s Atlantia remain locked in a battle to purchase Spanish infrastructure and toll roads group Abertis in a deal that could exceed $38bn, including debt. Bankers expect activity to pick up further next year, particularly among infrastructure, utility and energy companies.

Jens Welter, co-head of European investment banking at Credit Suisse, said: “The pick-up in deal activity across sectors and geographies is fuelled by a European economy that is in its fifth year of recovery and growing at the fastest pace in a decade.”

Activity in the Asia-Pacific region reached $911.6bn, up 11 per cent from a year ago, even as the volume of outbound dealmaking from China failed to surpass the record it hit in 2016.

A new capital-controls regime in China and increased scrutiny from the US government and European states took a toll on the ability of Chinese groups to invest in sensitive US technology or strike megadeals in 2017.

But Chinese companies still maintained an aggressive rate of overseas acquisitions, committing to $140.5bn of cross-border deals, making it the country’s second biggest year, albeit down about 34 per cent from 2016.

“For a year that started with a pretty gloomy outlook — with Cfius in the US and domestic capital controls in China — it turned out to be incredibly busy,” said Marcia Ellis, a partner at Morrison & Foerster in Hong Kong. “[Chinese companies] shifted their focus: less on the US and less on tech.”

Many groups, predominantly state-controlled ones, turned their gaze to infrastructure, resources and energy deals overseas. In the largest acquisition of the year for China, a consortium led by sovereign wealth fund CIC agreed to buy European logistics group Logicor from Blackstone for €12.25bn. State-backed Yancoal picked up a Rio Tinto coal asset in Australia for $3.5bn in another one of 2017’s largest Chinese transactions.

Much of that activity, along with some private sector deals, is expected to continue.

“On a relative basis, sentiment definitely feels better,” Colin Banfield, joint head of global cross-border M&A at Citigroup, said of the prospects for the new year.

“Based on the volume of activity and inquiries we are seeing right now, the outlook for 2018 is promising.”

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Macro :

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