Falling Domestic Demand Prompts Shiseido Takeover of Buy Escentuals

To expand outside a shrinking domestic market, Japan’s biggest cosmetics maker, Shiseido Co., has announced that it has made a tender offer to acquire Bare Escentuals Inc. for about $1.7 billion in cash.

 

Bare Escentuals develops, markets and sells cosmetics, skin care, and body care products under well-known brand names that include the popular bareMinerals brand. As a result of the transaction, the Bare Escentual’s international expansion is expected to gain further momentum and will specifically benefit from the growth potential in the highly attractive Chinese and broader Asian markets where Shiseido has a strong foothold.

 

The Japanese company, through a U.S. subsidiary, will make an offer to purchase all outstanding shares of Bare Escentuals common stock for US$18.20 per share. The tender offer price represents a 40.8% premium to Bare Escentuals’ average closing stock price over the last three-month period ended January 13, 2010, and a 39.9% premium over the closing price of Bare Escentuals’ common stock on January 13, 2010. The tender offer is scheduled to commence within 10 business days and is expected to close during the first quarter of 2010.

 

Meanwhile, Shiseido aims to raise the proportion of overseas sales to 50% by 2017 from 38% last fiscal year. After the takeover, overseas sales will account for 42% of Shiseido.

“This acquisition further enables Shiseido to move towards our goal of becoming a global player,” Shinzo Maeda, chief executive officer of Shiseido, said in a statement.

 

The transaction will strengthen both companies and provide a platform for further growth, ultimately bringing significant benefits to consumers, employees and shareholders by:

 

  • Expanding Shiseido’s brand portfolio into the mineral-based cosmetics market, attracting a wider customer base;
  • Creating a complementary multi-channel and truly global distribution network, giving Bare Escentuals greater access to Japan, one of the world’s largest cosmetics markets, as well as other fast-growing Asian markets such as China;
  • Strengthening Shiseido’s successful U.S. and European business;
  • Maximizing both companies’ production capabilities and R&D resources;
  • Delivering a significant premium to Bare Escentuals shareholders; and
  • Offering compelling growth prospects and future value creation for Shiseido shareholders.

 

The Tokyo-based company will use about 30 billion yen ($329 million) in cash and secure 150 billion yen in bridge loans to fund the acquisition.

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