Beauty Industry Outlook 2011

Beauty Industry Outlook 2011 - Beauty Industry 2010 Review...

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Unformatted text preview: Beauty Industry 2010 Review and 2011 Outlook January 2011 2010 Macroeconomic and Capital Markets Review A host of economic and financial market factors continue to impact the Beauty industry and the consumer overall Situation ▪ Unemployment ended the year at 9.4%; for adults under 30, it reached 19.5% ▪ Consumer confidence slowly rebounded from historical lows ▪ Home prices remained under pressure; American homes have lost ~$9 trillion since housing market’s peak peak in 2006 − Foreclosures neared an all-time high in late 2010 − High rates of negative equity persisted ▪ The consumer continued to deleverage, restructuring mortgages and credit agreements while increasing savings ▪ Valuations rebounded from 2009 lows − Market continued to trade off macro sentiment − Valuations were disconnected from business fundamentals − Although experiencing significant gains, Beauty stocks mostly underperformed the S&P 400 for the two years ended December 31, 2010 Strategic buyers sought growth through acquisitions Private equity began investing again given abundance abundance of funds and maturing investment horizons Debt markets opened, but on a limited basis IPO market opened, but selectively 2 Impact ▪ The $58.3 billion U.S. Cosmetics & Toiletries market contracted, with a recovery expected by 2014 − Discretionary categories have been hardest hit ▪ Near-term winners must take share or create new categories − “New value shoppers” across all demographic profiles seem willing to pay higher prices for quality quality and efficacy − Increase in private label and cover label brands − New, breakthrough categories are emerging based on advanced technology and consumers’ appetite for perceived value through time-saving products ▪ Brands without an online presence are falling behind ▪ M&A increased in Q3 and Q4 of 2010 highlighted by transformational acquisitions that provided buyers access to new capabilities, channels and markets Strategics ▪ Strategics led in both quantity and size of deals; notable transactions include Unilever’s acquisition of Alberto Culver, Shiseido’s purchase of Bare Escentuals, and Coty’s acquisition of both OPI and Philosophy which dramatically increased Coty’s presence in the prestige market ▪ More private equity exits than investments in Beauty in 2010 ▪ No Beauty IPOs last year Macro Capital Markets ▪ ▪ ▪ ▪ Source: Euromonitor. 2011 Beauty Industry Trends Trend RETAIL Cross-channel collaboration Exclusivity De-stocking New entrants New formats Channel competition is morphing into channel collaboration as beauty retailers realize the synergistic effects of the ever-increasing channel-agnostic consumer Retailers are increasing launches of cover labels (retailer-exclusive brands typically retailer-owned) to drive customer traffic Retailers are pushing more inventory risk to brand suppliers as well as expecting them to fill frequent spot buys on fast-moving items Fashion retailers are adding beauty and personal care to their assortment to capture incremental, hi high-margin business With the decline in department store sales, new open-sell formats are being tested within traditional beauty retailers and specialty retailers are adding services aimed at attracting and keeping the customer in-store more frequently and longer, respectively Private, online flash-sale sites are changing the shopping paradigm for prestige brands, capitalizing on consumer curiosity in discovering designer and indie brands at deep discounts Commentary New models BRANDS & PRODUCTS International expansion Emerging categories & niche segments Do-it-Yourself (“DIY”) Brands are racing to establish themselves in fast-growing regions, mainly Brazil and China New, breakthrough categories are emerging based on advanced technology and consumers’ appetite for perceived value through time-saving products (i.e., home-use beauty devices, lash enhancers, hair extensions, and a host of multi-functional products across all categories) Consumers continue to look for ways to curb spending, particularly on professional beauty services; simultaneously, brands are offering at-home solutions to address grooming’s most burdensome tasks (i.e., hair coloring, hair removal, manicures, and microdermabrasion) Through technological advances and rigorous testing, primarily in Skincare, brands are offering the consumer product claims on purported benefits through advertising, social networking, and packaging Product claims 3 U.S. Beauty Industry – Category Outlook & Trends Color Cosmetics ▪ ▪ ▪ ▪ ▪ Color Cosmetics category grew moderately up to 2008, but is expected to remain flat through 2014 Eye makeup will continue to show growth of 1.6% CAGR through 2014, while lip products decline by 2.5% CAGR Lash products and mascara are the segment winners Return to vibrant fashion colors for eyes, lips, and nails after several years of a muted palette New standard in complexion products is high-definition, flawless, natural-looking coverage through use of light-diffusion ingredients Haircare ▪ Haircare sales are expected to remain flat through 2014 as consumers trade down on basics ▪ Salon haircare is one of the few segments expecting additional, yet meager growth, at the expense of the conditioner segment ▪ In the mass, prestige, and professional channels, de-frizzing and smoothing are becoming mainstream, despite the controversy over use of formaldehyde, as Brazilian blow-out treatments and keratin protein promise semi-permanent straightening for textured hair ▪ Increasing use of hair extensions save women time and help achieve the look of volume and length ▪ Skincare category sales expected to increase slightly starting in 2013 ▪ Not surprisingly, facial anti-agers remain the star with expectations for a 3.3% CAGR through 2014 ▪ Mass brands are focusing on technological breakthroughs and efficacy claims to gain traction on launches with prestige price points ▪ Majority of anti-aging products are now formulated with ingredients intended to replicate professional laser treatments to diminish dark spots, uneven texture, and redness; separately, home-use beauty devices promise incremental results ▪ Three of the top six skincare brands are sold exclusively through Direct-to-Consumer (“DTC”) channels ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ Fragrance sales are expected to further decline by 2.4% CAGR through 2014, while European sales have recovered Premium fragrances should decline by 1.8% CAGR whereas mass fragrances are expected to decline by 4.7% CAGR Brand fragmentation continues to grow as celebrity and designer launches escalate Competition from other scented product categories such as shower gel and body moisturizers are taking share Studies show consumers purchasing fragrance based on mood, followed by intended activity Classics continue to represent the top 10 best sellers New fragrances incorporate ever-exotic ingredients including Szechwan pepper, mahogany vetiver, and absinthe Bath & Body category is expected to remain flat through 2014 Body wash and shower gel will grow by 2.3% at the expense of bath additives, talcum powder, and liquid soap Majority of sales come from the mass channel, with private label and cover label sales accounting for ~25% share Small increases from branded products for men, mainly shower gels and cleansers Skincare Fragrance Bath & Body Source: Euromonitor, Mintel, and NPD. 4 Overview of Public Market Comparables in the Global Beauty Industry Over the last year, public valuations deteriorated, reflecting investor pessimism and expectations of lower growth, public reflecting however, recently, as economic outlook has improved slightly, public valuations have followed suit Stock Performance Index Graph – Last 2 Years 350% Median EV/EBITDA 13.8x 300% 250% 200% 150% 100% 50% Dec-08 Feb-09 Apr-09 Jun-09 Jul-09 Sep-09 Nov-09 Dec-09 Feb-10 Apr-10 May-10 Jul-10 Sep-10 Oct-10 Dec-10 Specialty Retail Large and Mid-Cap S&P 400 Small-Cap Global Mega Cap Median Today = 9.9x Median Jan-2009 = 6.5x Median Aug-2007 = 10.4x 10.1x 10.5x 11.3x 10.7x 8.8x 8.2x 6.5x 5.3x 6.7x 5.3x 9.1x Global Mega-Cap Large and Mid-Cap 08/01/07 01/31/09 Small-Cap Today Specialty Retail ▪ ▪ ▪ Historical vs. Estimated Revenue Growth CAGRs Median Change in Last 2 Year to Next 2 Year CAGR = 3.5% 6.7% 3.7% 2.4% 0.9% 7.3% 4.9% 7.3% Global Mega-Cap: Colgate-Palmolive, Henkel AG, Johnson & Johnson, L’Oréal, Procter & Gamble, Unilever NV Large and Mid-Cap: Alberto-Culver, Amorepacific, Avon Products, Beiersdorf, Church & Dwight, Clorox, Estée Lauder, Kao Corp., Natura Cosmeticos, Oriflame Cosmetics, Shiseido Small-Cap: Elizabeth Arden, FANCL Corp., Helen of Troy, KOSE Corp Mandom Corp., Mandom Corp., Mannatech, Nu Skin Enterprises, Obagi Mannatech Nu Obagi Medical Products, Physicians Formula, Prestige Brands, Revlon, Unihair Specialty Retail: Limited Brands, Regis Corp., Sally Beauty, Ulta Salon (1.9%) Global Mega-Cap Large and Mid-Cap Small-Cap Specialty Retail ▪ Last 2-Year Next 2-Year Source: Capital IQ; LTM data as of December 30, 2010. 5 Select Public Market Comparables Stock Price Price Company Global Mega -Cap Colgate-Palmolive Co. Henkel AG & Co. KGaA Johnson & Johnson L'Oreal SA Procter & Gamble Co. Unilever NV Mean Median Large and Mid-Cap Alberto-Culver Company Amorepacific Corp. Avon Products Inc. Beiersdorf AG Church & Dwight Co. Inc. Clorox Corporation Estee Lauder Companies Inc. Kao Corp. Natura Cosmeticos S.A. Oriflame Cosmetics SA Shiseido Co. Ltd. L td Mean Median $37.07 1,007.92 29.04 55.32 69.97 63.64 79.67 26.78 28.64 52.36 21.71 97.7% 93.1% 80.2% 84.5% 98.5% 92.2% 99.3% 90.0% 96.4% 71.3% 84.5% 89.8% 92.2% $80.30 62.06 61.94 111.84 64.28 31.40 93.2% 96.4% 93.6% 95.8% 98.3% 98.2% 95.9% 96.1% 12/30/10 % of 52 Wk Hi Market Value Market Cap $38,760 24,085 170,103 65,556 179,932 88,415 $94,475 76,986 Ent Value* $41,772 27,351 160,002 67,779 211,911 97,268 $101,014 82,524 LTM 2.7x 1.4x 2.6x 3.0x 2.7x 1.7x 2.3x 2.6x EV / Revenue CY10 2.7x N/A 2.6x N/A 2.7x 1.7x 2.4x 2.6x CY11 2.5x N/A 2.5x N/A 2.6x 1.6x 2.3x 2.5x LTM 9.9x 9.3x 8.2x 15.4x 11.1x 11.0x 10.8x 10.5x Valuation Multiples EV / EBITDA CY10 10.0x N/A 8.1x N/A 10.7x 9.8x 9.6x 9.9x CY11 9.7x N/A 7.6x N/A 10.4x 9.0x 9.2x 9.3x P/E CY10 16.7x N/A 13.0x N/A 17.4x 16.0x 15.8x 16.4x CY11 15.9x N/A 12.4x N/A 16.1x 14.7x 14.8x 15.3x P/E/G CY10 CY11 163% N/M 203% N/M 188% 151% 176% 176% 155% N/M 193% N/M 174% 138% 165% 164% LTG Rate 10% N/A 6% N/A 9% 11% 9% 10% $3,672 5,889 12,463 12,548 4,977 8,874 15,598 14,355 12,338 2,905 8,638 $9,296 8,874 $3,521 5,726 14,763 9,684 5,186 11,521 16,156 14,654 12,540 3,248 9,987 $9,726 9,987 2.2x 3.4x 1.4x 1.2x 2.0x 2.1x 2.0x 1.0x 4.3x 1.6x 1.3x 2.0x 2.0x 2.2x N/A 1.3x N/A 2.0x 2.1x 2.1x N/A N/A N/A N/A 1.9x 2.1x 2.1x N/A 1.2x N/A 1.9x 2.2x 1.9x N/A N/A N/A N/A 1.9x 1.9x 13.5x 16.9x 10.7x 7.9x 9.7x 9.3x 13.1x 6.4x 17.7x 13.1x 10.5x 11.7x 10.7x 13.5x N/A 10.1x N/A 9.5x 9.0x 13.8x N/A N/A N/A N/A 11.2x 10.1x 11.6x N/A 8.8x N/A 8.8x 10.0x 12.3x N/A N/A N/A N/A 10.3x 10.0x 23.5x N/A 15.3x N/A 17.6x 14.9x 28.9x N/A N/A N/A N/A 20.0x 17.6x 20.8x N/A 13.5x N/A 15.9x 16.1x 24.7x N/A N/A N/A N/A 18.2x 16.1x 175% N/M 148% N/M 147% 163% 211% N/M N/M N/M N/M 169% 163% 155% N/M 131% N/M 133% 175% 180% N/M N/M N/M N/M 155% 155% 13% N/A 10% N/A 12% 9% 14% N/A N/A N/A N/A 12% 12% Note: $ in Millions, except Per Share Data. *Enterprise Value = Value of Shareholders’ Equity + Debt – Cash. Source: Capital IQ. 6 Select Public Market Comparables (continued) Stock Price Price Company Small-Cap Elizabeth Arden, Inc. FANCL Corp. Helen of Troy Limited KOSE Corp. Mandom Corp. Mannatech Inc. Nu Skin Enterprises Inc. Obagi Medical Products, Inc. Physicians Formula Holdings Inc. Prestige Brands Holdings Inc. Revlon, Inc. Unihair Company Limited Mean Median Specialty Retail Limited Brands, Inc. Regis Corp. Sally Beauty Holdings Inc. Ulta Salon, Cosmetics & Fragrance, Inc. Mean Median Overall Mean Overall Median $31.19 16.77 14.70 34.34 87.9% 77.3% 97.4% 92.2% 88.7% 90.1% $10,060 966 2,691 2,042 $3,940 2,366 $21,011 3,672 $11,637 1,212 4,209 2,033 $4,773 3,121 $22,463 4,209 1.3x 0.5x 1.4x 1.5x 1.2x 1.4x 1.6x 1.4x 1.4x 0.5x 1.4x 1.7x 1.2x 1.4x 1.8x 1.7x 1.2x 0.5x 1.3x 1.4x 1.1x 1.3x 1.6x 1.6x 7.5x 4.9x 10.7x 12.2x 8.8x 9.1x 10.0x 9.9x 9.8x 4.9x 10.9x 16.2x 10.4x 10.3x 10.2x 9.8x 7.2x 4.9x 9.4x 11.5x 8.2x 8.3x 8.9x 8.8x 25.9x 12.8x 19.7x 55.4x 28.4x 22.8x 20.5x 16.7x 15.8x 12.6x 15.6x 31.5x 18.9x 15.7x 17.1x 15.7x 169% 131% 129% 238% 167% 150% 168% 163% 104% 130% 102% 136% 118% 117% 149% 138% 15% 10% 15% 23% 16% 15% 12% 11% $23.52 14.92 30.12 25.70 26.93 1.80 30.44 11.52 3.76 11.85 9.80 13.34 98.0% 64.2% 98.9% 92.6% 77.5% 40.0% 89.6% 80.7% 88.7% 95.4% 52.2% 89.7% 80.6% 89.1% $662 969 923 1,492 630 48 1,891 254 51 593 509 491 $709 611 $1,031 599 1,018 1,065 431 29 1,839 208 61 830 1,691 313 $760 715 0.9x 0.5x 1.5x 0.5x 0.6x 0.1x 1.2x 1.8x 0.8x 2.8x 1.3x 0.5x 1.1x 0.8x 0.9x N/A 1.6x N/A N/A N/A 1.2x 1.9x 0.8x 2.7x N/A N/A 1.5x 1.4x 0.9x N/A 1.4x N/A N/A N/A 1.1x 1.7x 0.8x 2.5x N/A N/A 1.4x 1.2x 11.9x 4.1x 8.6x 4.6x 4.5x 10.3x 7.7x 9.9x 13.4x 8.2x 8.0x N/M 8.3x 8.2x 12.9x N/A 9.8x N/A N/A N/A 7.5x 12.3x 6.1x 8.5x N/A N/A 9.5x 9.1x 10.2x N/A 8.1x N/A N/A N/A 6.8x 8.2x 6.1x 7.9x N/A N/A 7.9x 8.0x 30.9x N/A 13.2x N/A N/A N/A 14.7x 29.5x N/A 15.3x 9.3x N/A 18.8x 15.0x 19.0x N/A 10.8x N/A N/A N/A 12.9x 13.4x 36.3x 14.6x 9.8x N/A 16.7x 13.4x 236% N/M 132% N/M N/M N/M 98% 178% N/M 156% N/M N/M 160% 156% 145% N/M 108% N/M N/M N/M 86% 81% 363% 149% N/M N/M 155% 126% 13% N/A 10% N/A N/A N/M 15% 17% 10% 10% N/M N/A 12% 12% 12/30/10 % of 52 Wk Hi Market Value Market Cap Ent Value* LTM EV / Revenue CY10 CY11 LTM Valuation Multiples EV / EBITDA CY10 CY11 P/E CY10 CY11 P/E/G CY10 CY11 LTG Rate Note: $ in Millions, except Per Share Data. *Enterprise Value = Value of Shareholders’ Equity + Debt – Cash. Source: Capital IQ. 7 M&A Trends in the Beauty Industry Strategics Strategics generate the majority of deals in the sector through both bolt-on and transformational acquisitions; valuations in-line with historical highs for performing companies Median Transaction Multiples 14.9x 13.1x 10.0x 13.6x 11.1x 11.2x Strategic vs. Financial Sponsor Acquisitions 21.7% 20.7% 12.0% 33.3% 41.9% 34.5% 78.3% 2.0x 1.7x 2.0x 2.0x 1.9x 2.0x 66.7% 58.1% 65.5% 79.3% 88.0% 2005 2006 2007 Median EV/Revenue 2008 2009 2010 2005 2006 2007 Corporate Strategic 2008 2009 2010 Median EV/EBITDA Financial Sponsor 2005 – 2010 Median EV/Revenue by Category Overall Median = 2.0x 2005 – 2010 Median EV/EBITDA by Category Overall Median = 11.7x 13.6x 10.5x 12.1x 11.0x 12.1x 2.5x 2.2x 2.3x 1.8x 1.4x Color Cosmetics Haircare Skincare Bath & Body Oral Care Color Cosmetics Haircare Skincare Bath & Body Oral Care Source: Public company filings, press releases, Capital IQ, and Demeter Group estimates as of December 31, 2010. 8 Select M&A Comparables – Color Cosmetics Closed Date Pending Pending Pending Dec-10 Sep-10 Jul-10 Jun-10 Jun-10 Mar-10 Feb-10 Apr-09 Mar-09 Feb-09 Jul-08 Dec-07 Oct-07 Mar-07 M ar-07 Feb-07 Nov-06 Jul-06 Jun-06 Apr-06 Feb-06 Dec-05 Feb-05 Jan-05 Mean Median OPI Products, Inc. Dr. Scheller Cosmetics AG Intercos ($69.8 million private placement) Avon Products Company Limited Dermacol A.S. Smashbox Beauty Cosmetics, Inc. Essie Cosmetics, Ltd. Tarte Cosmetics (private placement) Bare Escentuals, Inc. Ltd. (nka LC Luxuries Ltd.) Stila Corp. Urban Decay Cosmetics, LLC Pacific World Corporation YSL Beauté, Inc. DLI Holding Corp. Colorescience Lise Watier Cosmétiques, Inc. Fusion Brands, Inc. Pout Ltd. Caleel + Hayden, Inc. (gloProfessional) Gurwitch Products, LLC (Laura Mercier) Jane & Co. Stila Corp. Smashbox Beauty Cosmetics, Inc. Kanebo Cosmetics, Inc. Entrecap Corp. DLI Holding Corp. Target Coty Inc. Coty Inc. Investor Group Devon Holdings K.K. McBride plc Estée Lauder Companies Companies Inc. L'Oréal USA, Inc. Encore Consumer Capital Shiseido Co. Ltd. L'Oréal SA Patriarch Partners, LLC Castanea Partners Levine Leichtman Capital Partners L'Oréal SA Coty Inc. VMG Equity Partners Imperial Capital Corporation, Kensington Capital Partners Limited Li Eugene Melnyk Catterton Partners North Castle Partners Alticor Inc. Stone Canyon Venture Partners Sun Capital Partners TSG Consumer Partners Kao Corp. Pacific World Corporation Kelso & Company 85 24 N/A 100 N/A 24 60 3,672 N/A 461 N/A 20 N/A 75 50 60 32 1,800 N/A 381 N/A N/A N/A N/A N/A N/A 1 N/A N/A 38 N/A 1.2x N/A 1.3x N/A 0.4x 1.9x 2.0x N/A 1.2x 1.7x 1.8x N/A N/A N/A N/A N/A N/A N/M N/A N/A 12.1x 11.3x 11.2x Acquirer Enterprise Value* $950 N/A N/A 54 14 250 100 N/A 1,741 N/A 25 N/A 50 1,680 800 N/A 50 Target Revenue $413 70 285 225 N/A 80 29 N/A 558 N/A 35 N/A N/A 915 450 N/A 48 EBITDA N/A N/A $29 5 N/A 16 N/A N/M 177 N/A N/M N/A N/A 66 80 N/A 7 Enterprise Value/ Revenue 2.3x N/A N/A 0.2x N/A 3.1x 3.5x N/A 3.1x N/A 0.7x N/A N/A 1.8x 1.8x N/A 1.1x EBITDA N/A N/A N/A 11.5x N/A 16.0x N/A N/M 11.0x N/A N/M N/A N/A N/M 10.0x N/A 7.1x Note: $ in Millions. *Enterprise Value = Value of Shareholders’ Equity + Debt – Cash. Source: Public company filings, press releases, Capital IQ, and Demeter Group estimates as of December 31, 2010. 9 Select M&A Comparables – Haircare Closed Date Pending Pending Pending Oct-10 Mar-10 Oct-09 Mar-09 Mar-09 Apr-09 Sep-08 Sep-08 Jul-08 Jul-08 May-08 May-08 Mar-08 Dec-07 Nov-07 Oct-07 Jul-07 Jul-07 Jun-07 May-07 May-07 Apr-07 Feb-07 Feb-07 Nov-06 Oct-06 Jul-06 Jun-06 May-06 May-06 Mar-06 May-05 Apr-05 Mar-05 Jan-05 Mean Median Target Beiersdorf AG - Marlies Möller brand Alberto-Culver Co. Vanart, Pomada de la Campana, Galaflex, Affair and Sante Haircare Brands Hobi Kozmetik A.S. Innovative Brands, LLC (Pert Plus and Sure brands) Prell Shampoo, Denorex Dandruff Shampoo and Zincon Dandruff Shampoo Johnson Products Co. Infusium 23 Toni & Guy USA, Inc. Samy Companies Nioxin Research Laboratories, Inc. Dessange International Ceil - Comercio e Distribuidora Ltda. Luxe Beauty Holdings Inc. (Sexy Hair Concepts) (Sexy Pro-Duo NV Frederic Fekkai & Co, LLC Modern Health Laboratories, Inc. (Scalp Med) Canan Kozmetik A.S. C-BONS HairCare Co., Ltd. Ojon Corporation Jemella Limited Ouidad Products Corporation LaBella Beauty, Inc. (Newhall Laboratories) PureOlogy Research, LLC Beauty Alliance, Inc. Chapelton 21 Limited Kenra, Ltd. Capri International, Inc. Biotech Corporation (Nu Hair and Shen Min brands) Pert Plus (North America) Emil Kiessling Gmbh Ellin LaVar Textures Finesse and Aqua Net Brands Para Laboratories Inc. (Queen Helene) Nexxus Products Company Alterna Inc. scunci International, Inc. Frederic Fekkai & Co., LLC St. Cloud Capital/Rustic Canyon/Fontis Partners Helen of Troy Limited Unilever United States, Inc. Hoyu Co. Procter & Gamble Co. OFI Private Equity Capital Hypermarcas SA Thoma Cressey Bravo Sally Beauty Holdings Inc. Procter & Gamble Co. Guthy-Renker Corporation L'Oréal SA Beiersdorf AG Estée Lauder Companies Companies Inc. Montagu Private Equity Limited JH Partners LLC Parallel Investment Partners L'Oréal USA, Inc. L'Oréal SA Sally Beauty Holdings Inc. Imperial Capital Corporation BrandQuest Development Group, Inc. Natrol, Inc. Innovative Brands, LLC (Najafi Companies) Reichardt Abfüll-Logistik GmbH Woodridge Labs, Inc. Lornamead, Inc. The Hain Celestial Group, Inc. Alberto-Culver Co. TSG Consumer Partners Conair Corporation Catterton Partners N/A N/A 412 N/A N/A 192 104 170 34 440 16 N/A 453 140 326 N/A 25 257 575 62 N/A N/A 5 N/A N/A 0 N/A N/A N/A N/A N/A N/A 23 40 250 50 N/A 84 N/A 55 30 126 N/A 33 N/A 61 103 N/A 23 57 372 105 N/A N/A N/A N/A 102 N/A 85 20 40 N/A N/A N/A N/A N/A 37 N/A N/A N/A N/A 8 N/A 28 N/A N/A N/A 15 N/A N/A 3 35 44 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2.3x N/A 3.1x 1.1x 3.5x N/A N/A N/A 2.3 3.2x N/A 1.1 4.5x 1.5x 0.6x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2.3x 2.3x N/A N/A 11.1x N/A N/A N/A N/A 21.0 N/A 16.0x N/A N/A N/A 9.3 N/A N/A 8.0 7.3x 13.0x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 12.6x 12.1x Acquirer Troll Cosmetics GmbH Conopco (Unilever) Genomma Lab Internacional SAB de CV Dabur India Ltd. Helen of Troy Limited Ultimark Products Enterprise Value* N/A $3,732 85 69 69 9 Target Revenue N/A $1,551 42 N/A N/A N/A EBITDA N/A $248 N/A N/A N/A N/A Enterprise Value/ Revenue N/A 2.4x 2.0x N/A N/A N/A EBITDA N/A 15.0x N/A N/A N/A N/A Note: $ in Millions. *Enterprise Value = Value of Shareholders’ Equity + Debt – Cash. Source: Public company filings, press releases, Capital IQ, and Demeter Group estimates as of December 31, 2010. 10 Select M&A Comparables – Skincare Closed Date Pending Pending Pending Pending Pending Sep-10 Sep-10 May-10 Mar-10 Mar-10 Feb-10 Feb-10 Jan-10 Dec-09 Dec-09 Dec-09 Oct-09 Jul-09 Jun-09 Jun-09 May-09 Oct-08 Sep-08 Sep-08 Sep-08 Jul-08 Jun-08 May-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Aug-07 Jul-07 Apr-07 Apr-07 Feb-07 Jan-07 Aug-06 Jun-06 Jun-06 Mar-06 Mar-06 Mar-06 Dec-05 May-05 Apr-05 Mean Median Target Mantecorp Participações S.A. Beiersdorf AG - Juvena brand Paras Pharmaceuticals Ltd. Tjoy Holdings, Ltd Philosophy, Inc. Beauty Source Limited (St. Tropez) Trilogy Natural Products, Ltd. Hugo Naturals (private placement) Liz Earle Beauty Co. Natural Products Group (Arbonne, Levlad) Salu, Inc. ( Chattem Inc. THEFACESHOP Korea Co., Ltd. BlissWorld, LLC Simple Health & Beauty Limited Laboratoire Dr Renaud Prescription and Cosmetic Dermatology Products Kibio S.A.S. ZIRH Holdings, LLC The Art of Shaving, LLC Fem Care Pharma Ltd. Noxzema AGI Dermatics Zeezoo Software Corp. Clarins SA Forest Essentials (minority stake) MyChelle Dermaceuticals, LLC RéVive Skincare LLC Pevonia International, Inc. South Seas Spa Carol's Daughter Holdings, LLC Presperse, Inc. Terre d'Oc Néolia Brands Kate Somerville LLC Beijing Dabao Cosmetics Co. Ltd. Tiki Hut Holding Co. Philosophy, Inc. HDS Cosmetics, Inc. (DDF) Agera Laboratories, Inc. Pfizer consumer products Jurlique USA, Inc. Vendôme S.A. Beauty Source Limited (St. Tropez) N.V. Perricone M.D. Naomi, LLC SkinCeuticals , Inc. Inc Niadyne, Incorporated Hypermarcas SA Troll Cosmetics GmbH Reckitt Benckiser Group plc Coty Inc. Coty Inc. PZ Cussons plc Ecoya, Ltd. Manhattan Growth Partners Avon Products Inc. Eos Partners Inc. Sanofi-Aventis LG Household and Health Care Steiner Leisure Ltd. Alberto-Culver Co. Valeant Pharmaceuticals International Valeant Pharmaceuticals International Clarins SA Procter & Gamble Co. Procter & Gamble Co. Dabur India Ltd. Alberto-Culver Co. Estée Lauder Companies Companies Inc. Enhance Skin Products, Inc. Founding family of Clarins SA Estée Lauder Companies Encore Consumer Capital Gurwitch Products , LLC LLC TSG Consumer Partners Medspas of America, Inc Pegasus Capital Sumitomo Corporation Groupe Yves Rocher Laboratoire Cosmepro Inc. JH Partners LLC Johnson & Johnson (China) Investment Co., Ltd. Playtex Products Inc. The Carlyle Group Procter & Gamble Co. Isolagen Inc. Johnson & Johnson JH Partners LLC Johnson & Johnson Consumer France S.A.S. Lloyds TSB Development Capital TSG Consumer Partners Southern Cosmetics Inc L'Oréal SA Catterton Partners Acquirer Enterprise Value* $1,473 N/A 717 N/A 1,000 99 14 N/A N/A N/A 37 2,174 336 100 390 22 18 N/A 43 60 59 100 N/A N/A 3,168 N/A N/A 50 N/A N/A N/A N/A N/A 10 11 298 83 450 90 5 16,600 N/A N/A 98 100 N/A 150 N/A Target Revenue $432 N/A 88 N/A 200 33 7 N/A 50 N/A 41 463 203 85 105 10 8 12 20 30 19 50 N/A N/A 1,580 N/A N/A 25 N/A N/A N/A N/A 13 7 3 N/A 110 120 30 N/A 3,860 N/A 193 27 25 N/A 32 N/A EBITDA N/A N/A $24 N/A N/A 12 N/A N/A N/A N/A N/A 162 N/A 13 35 N/A N/A N/A N/A N/A 3 11 N/A N/A 231 N/A N/A N/A N/A N/A N/M N/A N/A 2 N/M N/A 14 45 N/A N/A 826 N/A N/A 6 N/A N/A N/A N/A Enterprise Value/ Revenue 3.4x N/A 8.1x N/A 5.0x 3.0x 2.0x N/A N/A N/A 0.9x 4.7x 1.7x 1.2x 3.7x 2.1x 2.3x N/A 2.2x 2.0x 3.1x 2.0x N/A N/A 2.0x N/A N/A 2.0x N/A N/A N/A N/A N/A 1.5x 4.2x N/A 0.8x 3.8x 3.0x N/A 4.3x N/A N/A 3.6x 4.0x N/A 4.7x N/A 3.0x 3.0x EBITDA N/A N/A 30.1x N/A N/A 8.5x N/A N/A N/A N/A N/A 13.4x N/A 7.8x 11.0x N/A N/A N/A N/A N/A 20.9x 9.1x N/A N/A 13.7x N/A N/A N/A N/A N/A N/M N/A N/A 6.7x N/M N/A 6.0x 10.0x N/A N/A 20.1x N/A N/A 16.3x N/A N/A N/A N/A 13.4x 11.0x Note: $ in Millions. *Enterprise Value = Value of Shareholders’ Equity + Debt – Cash. Source: Public company filings, press releases, Capital IQ, and Demeter Group estimates as of December 31, 2010. 11 Select M&A Comparables – Bath & Body Closed Date Pending Oct-10 Dec-10 Nov-10 Oct-10 Apr-10 Jun-09 Dec-08 Nov-08 Oct-08 Jun-08 May-08 May-08 Apr-08 Apr-08 Jan-08 Jan-08 Nov-07 Oct-07 Jun-07 Jun-07 Feb-07 Jan-07 Jan-07 Jan-07 Dec-06 Nov-06 Sep-06 May-06 Mar-06 Nov-05 Oct-05 Jul-05 May-05 May-05 Mar-05 Mean Median Target Colgate-Palmolive Ind. e Com. Ltda., Pom Pom Soap SSL International plc Sara Lee: Global Body Care and European Detergents Business Kiss My Face (private placement) The King of Shaves Company Ltd. (private placement) Tiny Tillia Edge and Skintimate Shave Preparation Business Cosmivoire S.A. Calgon & The Healing Garden Ascendia Brands, Inc. (Mr. Bubble) M&A Santé Beauté, SAS H2O Plus Inc. Cederroth AB Pacific Direct Ltd. Caldrea Co. Les Produits Aromatiques Clair de Lune Inc. Sanctuary Spa Holdings Ltd. Burt's Bees, Inc. Gilchrist & Soames Inc. The Thymes, LLC L'Occitane SA Healing Garden and Calgon Brands (Coty) Twincraft, Inc. Avalon Natural Products, Inc. Tri Tech Laboratories, Inc. Universal Razor Industries, Inc. Neways, Inc. Sure Deodorant Right Guard, Soft & Dri, Dry Idea Brands The Body Shop International plc Playtex Products, Inc. (10 non core brands) Gillette Co. Molton Brown Group, Ltd. Lotta Luv, LLC Slatkin & Company, Inc. Surrey, Inc. I nc Calitus Equity Partners Kai Industries Co., Ltd. Avon Products Inc. Energizer Holdings Inc. Unilever plc Ilex Consumer Products Group, LLC The Village Company, LLC L'Occitane S.A. Cordova, Smart & Williams and Goldman Sachs Urban CapMan Primary Capital Limited S.C. Johnson & Son, Inc. GB Merchant Partners, LLC PZ Cussons plc Clorox Corporation Swander Pace Capital Goff Management, Inc. Managers of L'Occitane SA Ascendia Brands, Inc. Langer Inc. The Hain Celestial Group, Inc. LEK, Inc. KAI USA Ltd. Golden Gate Capital Innovative Brands , L LC (Najafi Companies ) Dial Corp (Henkel KGaA) L'Oréal SA Ascendia Brands, Inc. Procter & Gamble Co. Kao Corp. Charles Komar & Sons, Inc. Limited Brands Inc. WOW Holdings , Inc. I nc N/A N/A N/A 275 N/A N/A 5 N/A N/A 239 40 N/A N/A 149 950 85 N/A 1,069 125 32 120 N/A N/A N/A 100 420 1,272 57 54,000 299 N/A N/A N/A N/A N/A 5 150 N/A 23 N/A 28 40 239 48 N/A N/A 52 170 37 N/A 449 N/A 27 40 N/A N/A N/A 35 275 842 N/A 10,000 57 N/A N/A N/A N/A N/A N/A 30 N/A 14 N/A N/A N/A 15 N/A N/A N/A 12 51 7 N/A N/A N/A 2 10 N/A N/A N/A N/A 41 109 N/A 3,857 N/A N/A N/A N/A N/A N/A N/A 1.8x N/A N/A N/A N/A N/A 1.0 0.8x N/A N/A 2.8x 5.6x 2.3x N/A 2.4x N/A 1.2x 3.0x N/A N/A N/A 2.8x 1.5x 1.5x N/A 5.4x 5.3x N/A N/A N/A 2.7x 2.3x N/A N/A N/A 9.2x N/A N/A N/A N/A N/A 16.0 N/A 13.0x N/A 12.1x 18.5x 12.5x N/A N/A N/A 15.7x 12.0x N/A N/A N/A N/A 10.3 11.7x N/A 14.0x N/A N/A N/A N/A 13.2x 12.5x Hypermarcas SA Reckitt Benckiser Group plc Unilever plc Acquirer Enterprise Value* $50 4,075 1,877 Target Revenue N/A $1,253 1,104 EBITDA N/A $211 188 Enterprise Value/ Revenue N/A 3.3x 1.7x EBITDA N/A 19.4x 10.0x Note: $ in Millions. *Enterprise Value = Value of Shareholders’ Equity + Debt – Cash. Source: Public company filings, press releases, Capital IQ, and Demeter Group estimates as of December 31, 2010. 12 Select M&A Comparables – Oral Care Closed Date Pending Mar-10 Dec-08 Oct-08 Jul-08 Jun-07 Feb-07 Jul-06 Jul-06 Apr-06 Apr-06 Mar-06 Dec-05 Nov-05 Jun-05 Apr-05 Jun-04 Oct-03 Sep-03 Mean Median Overall Mean Overall Median Bitufo Floss and Go, Inc. Laclede, Inc. I nc Ascendia Brands Inc. (Binaca mouthwash and Tek toothbrush) Del Pharmaceuticals, Inc. (Orajel) Water Pik, Inc. Sunstar, Inc. Cumberland Swan Holdings, Inc. Fresh Breath Ltd Water Pik Technologies Inc. OMNII Oral Pharmaceuticals Tom's of Maine, Inc. Rembrandt Oral Care Products Procter & Gamble Co. (S pinbrush Toothbrush Busienss ) Zila Pharmaceuticals, Inc. (Zilactin Brand OTC Lip and Oral Care Products) Natural Dentist, Inc. Zooth, Inc. Pepsodent, Aim, Mentadent, Close Up Brands Glide Dental Floss Great Spirit Ventures, LLC Gillette Co. Church & Dwight Co. Inc. Procter & Gamble Co. N/A N/A 104 N/A N/A N/A 122 45 N/A N/A N/A N/A N/A N/A 0.9x N/A 1.9x 1.1x 2.5x 2.2x N/A N/A N/A N/A 11.1x 11.7x 12.7x 12.0x Church & Dwight Co. Inc. EG Capital Group, LLC Nomura Capital Investment Co., Ltd. Vi-Jon Laboratories, Inc. Blistex Inc. The Carlyle Group and Zodiac SA (together, Coast Acquisition Corporation) 3M Co. Colgate-Palmolive Co. Personal Products Company, Inc. Church & Dwig ht Co., I nc. Blairex Laboratories, Inc. N/A 119 N/A 105 11 N/A 50 N/A 110 N/A N/A 8 N/A N/A N/A N/A 2.4x N/A 1.0x N/A N/A 14.9 N/A N/A N/A 380 N/A 340 N/A N/A 340 100 N/A 581 N/A N/A 321 $28 N/A 55 N/A N/A 35 3.8x N/A 0.6x N/A N/A 1.1x 13.6x N/A 6.2x N/A N/A 9.8x Target Hypermarcas SA Dr. Fresh, Inc. GlaxoSmithKline Consumer Healthcare, L .P. Dr. Fresh, Inc. Acquirer Enterprise Value* $48 N/A 170 3 Target Revenue N/A N/A $50 N/A EBITDA N/A N/A N/A N/A Enterprise Value/ Revenue N/A N/A 3.4x N/A EBITDA N/A N/A N/A N/A Note: $ in Millions. *Enterprise Value = Value of Shareholders’ Equity + Debt – Cash. Source: Public company filings, press releases, Capital IQ, and Demeter Group estimates as of December 31, 2010. 13 For Additional Information on Demeter Group’s Beauty Advisory Services: Jeff Menashe Chairman [email protected] Michelle Cherrick Chief Executive Officer [email protected] Jani Friedman Managing Director [email protected] 100 Spear Street, Suite 1115 San Francisco, CA 94105 (415) 632-4400 14 ...
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