Giant Contract Manufacturer of Cosmetics Formed

Giant Contract Manufacturer of Cosmetics Formed

Knowlton Development Corporation has agreed to merge with HCT Group to create a global contract manufacturer of cosmetics products.

In December 2018, Cornell Capital and HarbourVest acquired Knowlton Development Corporation (KDC) from Novacap. At that time, members of the senior management team of KDC invested alongside Cornell and HarbourVest, and Caisse de dépôt et placement du Québec (CDPQ) and Investissement Québec (IQ) rolled over significant stakes of their equity as part of the transaction. Both CDPQ and IQ co-invested with Novacap on its buy of KDC in October 2014.

HCT is a contract manufacturer of cosmetic products and provides a range of services including concept development and design, manufacturing, fill and assembly, and logistics.

HCT was founded by Chris Thorpe, along with his wife Clare and eldest son James, in 1992. The company is headquartered in Santa Monica with additional offices in New York, New Jersey, London, Paris, Milan, Hong Kong, South Korea and Shanghai.

At the close of the KDC and HCT merger, which is expected in early 2020, Cornell Capital and HarbourVest and their co-investors will have a controlling equity interest in the combined companies.

KDC is a contract manufacturer of regulated and non-regulated personal care products including lotions, soaps, fragrances, cosmetics and deodorants. The company also manufactures home care products (disinfectants, cleaners, and detergents), industrial products (floor waxes, protectants, cleaners, degreasers, and disinfectants), and auto care products (car waxes, protectants, cleaners, and air care).

KDC, founded in 2002, has approximately 5,000 employees and is headquartered near Montreal in Longueuil, Québec with 16 operating facilities throughout North America, the UK, France and the Czech Republic.

Under Cornell and HarbourVest ownership, KDC has made three add-on acquisitions to scale the platform, acquire new technologies and expand globally. In July 2019, the company acquired the manufacturing business of UK-based Swallowfield, a contract manufacturer of personal care and beauty products; also in July 2019, KDC acquired Alkos, a France-based contract manufacturer of makeup, skincare products, cosmetic pencils and perfumed soaps; and in November 2019, KDC acquired Benchmark Cosmetic Laboratories, a California-based formulator of skin, hair and sun care products.

“Together, these businesses will provide greater innovation and growth opportunities in one of the most attractive subsectors in the consumer packaged goods space,” said Justine Cheng, the chair of the KDC board of directors and a partner at Cornell Capital. “KDC and HCT have best-in-class management teams and we expect that coupling KDC’s manufacturing capabilities with HCT’s packaging design expertise will enable the new platform to better serve its customers globally. In addition, the transaction will improve the overall financial profile of the companies through further diversification and increased scale.”

Following the close of the merger, Nicholas Whitley, the president and CEO of KDC, and Tim Thorpe, the president and CEO of HCT, will continue as CEOs of each business.

“This transformative transaction will enhance how we serve beauty and personal care brands around the world,” said Mr. Whitley. “Our vertically integrated platform will offer the industry a true one-stop solution. With the support of our partners at Cornell Capital, as well as CDPQ, IQ and HarbourVest, we have been able to build our reputation as a top-tier innovator for an expanded base of customers. HCT’s cutting-edge designs, engineering, manufacturing and global reach will enable us to further elevate our product and service offerings to better serve and anticipate the evolving needs of our valued customers.”

Cornell Capital was founded in 2013 by Henry Cornell, the former Vice Chairman of Goldman Sachs’ Merchant Banking Division, to invest in companies in the consumer, energy, financial and industrial sectors. In June 2018, the firm held a final closing of its inaugural private equity fund, Cornell Capital Partners LP, with total capital commitments of $1.3 billion.  The firm has offices in New York and Hong Kong.

HarbourVest invests in venture capital, buyout, mezzanine debt, credit, and real estate through primary fund investments, secondary purchases, and direct co-investments.  The firm has more than 500 employees, including 125 investment professionals, located in Asia, Europe, Latin America, and the United States.  In over 30 years of investing in private equity, the firm has committed more than $36 billion to newly-formed funds, completed over $21 billion in secondary purchases, and invested $10 billion directly in operating companies. HarbourVest is headquartered in Boston with additional offices in Beijing, Bogotá, Hong Kong, London, Seoul, Tel Aviv, Tokyo, and Toronto.

UBS Securities and Jefferies are acting as joint lead arrangers for the debt financing for this transaction. Jefferies is the financial advisor to KDC and Cornell Capital, and Houlihan Lokey is the financial advisor to HCT.

© 2019 Private Equity Professional | December 17, 2019

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