cosmetics

Castanea Partners Exits Urban Decay

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Castanea Partners has signed an agreement to sell Urban Decay, a women’s cosmetics company, to L’Oréal.

Urban Decay is a women’s cosmetics company with products that emphasize femininity and irreverence. The company markets its products through domestic and international specialty beauty retailers, department stores, and its website. The company is based in Newport Beach, CA (www.urbandecay.com).

“The entire Urban Decay team has done a great job of rapidly growing the company while remaining true to their brand and its values. We very much enjoyed working with the Urban Decay team and are confident they will thrive with their new partners.” said Steve Berg, Partner from Castanea.

Urban Decay was founded in 1996 by Wende Zomnir and was bought by Moet-Hennessy Louis Vuitton in 2000, before being sold again in 2002 to the Falic Group.  In 2009 it was acquired by Castanea Partners.  Urban Decay had revenues of $140 million over the past 12 months, more than three times its revenue at the time of Castanea’s investment in 2009.

“Castanea has been a great partner for Urban Decay as they truly understand who we are and appreciate what it takes to grow a successful brand, said Ms. Zomnir, Chief Creative Officer.

Castanea Partners invests from $15 million to $75 million in small and middle market companies in publishing, education, training, consumer brands, specialty retail, and marketing services.  Castanea participates in leveraged buyouts, growth and acquisition equity investments, and operationally challenging situations.  The firm is currently investing from its third fund, a $500 million fund that targets companies with enterprise values up to $250 million. The firm is located in Newton, MA (www.castaneapartners.com).

“Castanea was incredibly supportive of our team and encouraged us to invest in our vision of becoming one of the top cosmetics brands in the world,” said Urban Decay CEO Tim Warner

L’Oréal is one of the world’s leading beauty companies. The company has built a portfolio of 27 international, diverse and complementary brands. With sales amounting to 20.3 billion euros in 2011, L’Oréal employs 68,900 people worldwide.  The company is based in Paris, France (www.loreal.com).

Castanea Partners was advised by Deutsche Bank, Piper Jaffray, and Deloitte.  L’Oréal was advised by Lazard and Weil, Gotshal and Manges.

© 2012 PEPD • Private Equity’s Leading News Magazine • 11-26-12

Swander Pace Capital Acquires Physicians Formula

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Physicians Formula Holdings, a cosmetics and skin care company, and Swander Pace Capital have entered into an agreement under which Swander Pace will acquire Physicians Formula for $65 million. “We are pleased that Swander Pace has agreed to purchase our company. The firm has a record of success in acquiring and operating companies in the consumer space, and we believe they will add value to our business as we continue to successfully execute our growth initiative,” said Ingrid Jackel, Physicians Formula Chairwoman and CEO.

Physicians Formula is a cosmetics and skin care company operating in the mass market prestige, or “masstige,” market. Under its Physicians Formula brand name, created in 1937, the company develops, markets and distributes premium-priced products for the mass market channel. Physicians Formula products are sold in over 25,000 stores including those operated by Wal-Mart, Target, CVS and Rite Aid. The company was founded in 1937 and is based in Azusa, CA (www.physiciansformula.com).

Under the terms of the agreement, Swander Pace will acquire all outstanding shares of the common stock of Physicians Formula (NASDAQ:FACE) for $4.25 per share in cash, or approximately $65 million. The per share price represents a premium of approximately 15% over Physicians Formula’s closing stock price on August 14, 2012. The Physicians Formula’s Board of Directors has approved the agreement.

Swander Pace Capital invests in middle-market consumer products companies including branded and non-branded, manufacturers, marketers, and distributors that sell through a range of retail and institutional channels. The firm generally targets companies up to $300 million in revenues. Swander Pace manages over $1 billion in equity capital and has offices in San Francisco, CA and Bedminster, NJ (www.spcap.com).

“The acquisition of Physicians Formula reinforces Swander Pace’s investment focus on lower middle-market consumer products industry companies,” said Mo Stout, a Swander Pace Managing Director. “Physicians Formula is a pioneer in the cosmetics industry, and we are committed to working with its management team on this next stage of growth and innovation for the company.”

Blackstone Advisory Partners delivered a fairness opinion in connection with this transaction. Sheppard Mullin Richter & Hampton is serving as legal advisor to Physicians Formula and Kirkland & Ellis provided legal counsel to Swander Pace in connection with the transaction.

PEPD 8-16-12