L'Oreal Buys Stake in Swiss Skincare Company Galderma — 2nd Update

By Andrea Figueras and Mauro Orru

L'Oreal agreed to buy a minority stake in Swiss skincare company Galderma valued at $1.85 billion, bolstering its exposure to the fast-growing market for aesthetic injections such as fillers.

The deal marks L'Oreal's return to Galderma, a company it co-founded with Nestle more than four decades ago and that it exited in 2014, and a high-profile backing for the skincare specialist nearly five months after its listing in one of the biggest initial public offerings of the year.

The French cosmetics giant highlighted Galderma's position as one of the biggest players in the market for skin-smoothing injections--a category in which the Swiss company's Dysport brand competes with AbbVie's Botox--and said the investment allows it to explore partnering in the fast-growing market.

"We have been observing these markets from the outside," L'Oreal's Chief Executive Nicolas Hieronimus said on a call with analysts. "We are very confident that this market will continue to grow."

L'Oreal said Monday that it was acquiring a 10% stake in Galderma from EQT-led Sunshine SwissCo, Abu Dhabi Investment Authority and Auba Investment Pte. L'Oreal didn't disclose the value of the stake, but said it would fund the deal through cash and credit lines.

A 10% stake in Galderma was valued at roughly 1.59 billion Swiss francs, equivalent to $1.85 billion, based on the stock's closing price on Friday of CHF66.96.

Galderma's shares jumped more than 7% on the news, while L'Oreal fell as much as 1.9% but later pared losses.

L'Oreal and Galderma also agreed to work toward a new research-and-development partnership, with the aim of jointly developing new dermatology products.

The cooperation between the two companies will focus on injectable aesthetics and L'Oreal won't take part in any Galderma strategic decision in the segments in which they compete, executives at the French company said.

Injectable aesthetics is the fastest-growing beauty category globally and a market that has gone mainstream since the French giant last was a shareholder of Galderma, analysts at Bernstein wrote in a research note.

L'Oreal seems to be testing out how comfortable it and its investors can be with the medicalization of the industry and the associated risks, as an increasing amount of consumers' budgets shifts toward medical beauty, the analysts added.

The global injectable aesthetics market was worth $9 billion last year and is projected to grow at an annual pace of 7%-8% through to 2027, Jefferies analysts said in a recent research note. Galderma aims to increase its sales at a faster rate than the overall market.

Galderma Chief Executive Flemming Ornskov recently told The Wall Street Journal that injectable aesthetics will continue to fuel growth.

Galderma also sells skincare and therapeutic-dermatology products.

The company was founded in 1981 as a joint venture between L'Oreal and Nestle, but the French beauty group sold its 50% stake to the Swiss consumer-goods giant a decade ago. Nestle in 2019 sold the business to a consortium formed by Swedish private-equity group EQT, Abu Dhabi Investment Authority, Canada's PSP Investments and other institutional investors.

For Galderma, the deal comes after the company went public in March. At that time, the listing of the Swiss company was the largest IPO of the year, before it was surpassed by the listings of cold-storage company Lineage in the U.S. and Jean Paul Gaultier owner Puig Brands in Spain. Galderma's IPO remains the third biggest in 2024 to date, according to Dealogic data.

L'Oreal's stake purchase in Galderma comes nearly a year after the French company completed its acquisition of Australian luxury-beauty brand Aesop in a $2.5 billion deal, including debt, that expanded its luxury portfolio that already houses brands the Lancome, Biotherm and Kiehl's brands.

Galderma said it doesn't plan to make any changes to its board of directors following the transaction, which is expected to be completed in the coming days. L'Oreal said it wouldn't seek representation on the company's board.

"We fully support Galderma's management and its strategy as a leading dermatology pure player, respect its independence and are very confident in its long-term growth potential," Hieronimus said.

Write to Andrea Figueras at andrea.figueras@wsj.com and Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

August 05, 2024 06:07 ET (10:07 GMT)

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