L'Oreal to buy 10% stake in Swiss skincare firm Galderma
Adds comments from Galderma CEO after analyst call, paragraphs 12-13
By Dave Graham and Dominique Patton
ZURICH/PARIS, Aug 5 (Reuters) -L'Oreal OREP.PA will acquire a 10% stake in Swiss skin care firm Galderma GALD.S from a group of major shareholders, the two companies said on Monday, as the French firm seeks a cut of the profits from the booming injectable cosmetics market.
Galderma, originally set up as a joint venture between Nestle NESN.S and L'Oreal before the latter sold its 50% stake in 2014, listed an initial tranche of its stock in late March.
L'Oreal is buying the stake at an undisclosed premium from Sunshine SwissCo AG - a consortium led by Swedish private equity firm EQT - Abu Dhabi Investment Authority and Auba Investment Pte. Ltd in a deal due to be completed in the coming days.
Shares in Galderma, which had a market capitalisation of almost 16 billion Swiss francs ($18.85 billion) at Friday's market close according to LSEG data, jumped over 7% after the news before trimming gains. L'Oreal shares were largely flat.
The stake, worth 1.6 billion Swiss francs based on Galderma's market cap, is small for the French giant, which said it will fund the purchase via available cash and credit lines.
It marks a shift in its strategy, giving L'Oreal a stake in injectable products that reduce wrinkles such as fillers and neuromodulators, which include botox, for the first time.
"It allows us to explore partnering in the fast-growing aesthetics market, a key adjacency to our own pure beauty play," L'Oreal CEO Nicolas Hieronimus said in a statement.
About half of Galderma's revenue comes from injectables. The market was worth 9.3 billion euros last year, Hieronimus told analysts on a call.
"The penetration rate of these procedures already stands at mid-single digits and looking at the number of people who consider using these procedures, the penetration rate could double in the next decade," he said.
The two companies also signed a memorandum of understanding to work on research and development collaboration. The deal will ultimately enable the pair to jointly develop new products to expand their respective portfolios, Galderma said.
"The stake is positioned as a strategic interest, to facilitate cooperation on product development, but we assume that this is also a way to get closer to Galderma with a view of higher ownership/control over time," said analysts at Jefferies.
Galderma CEO Flemming Ornskov said he would not speculate on whether L'Oreal's stake could increase, but noted the French firm had undertaken a "prolonged" standstill agreement with the shareholders, and tender obligations, without giving details.
"We are competitors," he told an analyst call. "And we will continue to be strong competitors."
L'Oreal will not take a seat on Galderma's board to prevent any relationship on similar business activity, executives said.
The two firms also compete in skincare with Galderma's Cetaphil brand and L'Oreal's CeraVe.
L'Oreal's dermatological beauty division, which also includes the La Roche-Posay brand, has grown by high-double digits in recent years, boosted by social media and consumer interest in science since the COVID pandemic.
But growth in the unit slowed in the second quarter to 10.5%, missing estimates, partly due to increasing competition.
The global aesthetics market is predicted to grow to $25.9 billion by 2028 from $15.4 billion last year, according to MarketsandMarkets.
($1 = 0.8486 Swiss francs)
Reporting by Dave Graham in Zurich and Dominique Patton in Paris; additional reporting by Gianluca Lo Nostro; editing by Friederike Heine, Miranda Murray, Kirsten Donovan and David Evans
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