Wide-Moat L’Oreal Bolsters Its Luxury Segment With Aesop Deal; Shares Expensive

In its largest-ever acquisition, L’Oreal announced it has signed an agreement (expected to close in 2023’s third quarter) to buy Aesop, a luxury skin, hair, and body care brand, from Natura & Co. Natura shopped it around over the past few months and reportedly drew interest from wide-moat LVMH and others. The all-cash sale to L’Oreal values Aesop at $2.525 billion, or 4.7 times 2022 sales of $537 million. While seemingly a high price, it aligns with current and historical valuations of L’Oreal itself and reflects the potential for Aesop and the luxury beauty market. Indeed, it was only a few months ago that wide-moat rival Estee Lauder bought Tom Ford for $2.3 billion (net), or approximately 2.5 times sales.