New York-based Estée Lauder, one of the world’s largest cosmetics businesses, acquired an initial 29-per-cent stake in Deciem four years ago and announced plans on Tuesday to increase its ownership to 76 per cent. In an interview, Deciem chief executive officer Nicola Kilner said the transaction was prompted in part by the need to share the cost of expansion into markets such as India, the Philippines and the Middle East.
Deciem owns a portfolio of six brands, including The Ordinary and Niod cosmetics, and this week’s transaction values the eight-year-old business at US$2.2-billion. Estée Lauder said it plans to acquire the remainder of Deciem in three years, at an unspecified price.
The deal was made after a period of head-office drama at Deciem in 2018 that culminated with Mr. Truaxe firing many of his long-time colleagues, including Ms. Kilner, a co-founder and the current CEO. He was hospitalized a number of times and threatened in posts on Instagram to shut down the entire business. Estée Lauder went to court in a successful bid to remove Mr. Truaxe from the company.
Mr. Truaxe, a former computer programmer, was recognized as the creative spark at Deciem, inspiring fierce client loyalty with a widely followed online presence. He died in January, 2019, at 40 after falling from the balcony of his Toronto condominium. On Tuesday, Ms. Kilner said: “Brandon would be very proud of what we’ve achieved today. He always believed that Estée Lauder shared our values. He called it our forever home.”
Estée Lauder is buying Deciem stakes owned by Mr. Truaxe’s estate; Vancouver-based co-founder Pasquale Cusano, who also owns a jewellery-store chain; and the company’s employees. The transaction is expected to close by the end of June. Deciem, which has 1,100 employees, will keep its head office in Toronto and the management team is to remain in place.
Ms. Kilner said existing Deciem shareholders negotiated the additional three years of ownership as a way to continue sharing in the upside of building the company.
Deciem was originally conceived as an incubator for cosmetic brands – the name comes from the Latin decima, for 10th, and was meant to reflect a business that did 10 things at once. Ms. Kilner said management focused a great deal of energy in recent years on The Ordinary, a line distinguished by plain packaging and low prices and endorsed by celebrities such as Kim Kardashian, but plans to develop new brands in the future, with Estée Lauder’s support.
Estée Lauder is adding Deciem’s stable, which posted sales of US$460-million over the past year, to a brand portfolio that includes Toronto-born MAC Cosmetics, acquired in 1994, and lines such as Aveda and Clinique.
Last year, Estée Lauder’s sales were US$14.9-billion and it earned a US$684-million profit. The company’s stock price has more than doubled over the past 12 months.
“Estée is going to emerge out of COVID in a much stronger position than prior (which is saying a lot since they were performing well prior to COVID),” analyst Nik Modi at RBC Capital Markets said in a recent report. “The company appears especially well-positioned to benefit from both a rise in Chinese consumer spending as well as a channel shift to e-commerce globally.”
For the deal, Deciem used Baylor Klein Ltd. as its financial adviser – the boutique bank focuses on household and beauty care companies – and law firms Fasken Martineau DuMoulin LLP, Farris LLP, Gowling WLG LLP and Blake, Cassels & Graydon LLP.
Investment bank Perella Weinberg Partners advised Estée Lauder on the acquisition, along with law firms Lowenstein Sandler LLP and Osler, Hoskin & Harcourt LLP.
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