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L’Oreal Pays $6.5 Billion to Buy Chinese Leading Facial Mask Brand “Magic”

L’Oreal, the world’s largest cosmetics group, has offered HK$6.5 billion to acquire Chinese famous skincare firm Magic Holdings International Limited, according to the joint announcement by the two companies on Aug 15th of this month.

L’Oreal, the world’s largest cosmetics group, has offered HK$6.5 billion to acquire Chinese famous skincare firm Magic Holdings International Limited, according to the joint announcement by the two companies on Aug 15th of this month.

Magic Holdings is a skincare enterprise based in Guangzhou, predominantly offering diversified facial masks to cater to different skin types in China. It has occupied the largest share (26.4% in 2012) of the Chinese facial mask market, ranked top with sales of 150m Euros last year, up 29 percent on the previous year, reported by AC Nielsen.

Mr Bei Hanqing, L’Oreal China CEO, stated facial masks are ones of the fastest-growing areas in China’s beauty market, which still has vast potential for future development. As the top facial mask brand in China, Magic’s market impact can help L’Oreal to permeate and dominate the prosperous skincare segment in a fast way. According to the introduction on its official website, Magic has 288 distributors with 12,471 points of sale nationwide.

The deal is waiting to be approved by China’s Ministry of Commerce. Once completed, it will mark L’Oreal’s biggest purchase since its 2008 acquisition of Yves Saint Laurent Beaute for 1.15 billion Euros from the French Group PPR and be the biggest foreign acquisition of domestic brands in personal care chemical industry in China. Magic will also become the third domestic cosmetic brands bought by L’Oreal after YUE-SAI and MININURSE.

The concern has been cast over whether Magic will be rebranded by L’Oreal. In response to this issue, Mr Bei Hanqing revealed that after merger Magic will operate as an independent business unit with its previous management team and be complemented with other affiliate brands under L’Oreal.

L’Oreal is one of the world’s leading beauty companies in production of all forms of beauty products sold in more than 130 countries for over 100 years and has built a portfolio of 27 international, diverse and complementary brands, such as Maybelline, Lancôme, Biotherm and Vichy, with sales amounting to EUR 22.5 billion in 2012. It has 72,600 employees worldwide. As has been proven an excellent performance in cosmetic and beauty products, L’Oreal is believed to be able to provide Magic expertise in R&D, sales and marketing to promote the growth of Magic. 

China's cosmetics market is expected to grow 63 percent for the five years ending 2015 compared to flat growth of second-ranked Japan, according to consumer research firm Euromonitor. International companies are lining up to gain profits from the booming beauty market in China. Notable foreign companies have advantages of strong R&D ability and advanced marketing strategies over domestic counterparts, who are normally incapable of competing with overseas giants in high-end products and doomed to meet bottleneck if providing low-end cosmetics.

Therefore, several domestic firms, though already very popular, tend to acquiesce to takeover bids from multinational enterprises. Besides Magic, LVMH-backed private equity fund L Capital Asia has invested in Chinese leading eye cream brand Marubi this year; in 2010, the world’s largest perfume company Coty acquired Tjoy; in 2008, Johnson&Johnson purchased Dabao, a brand that enjoys major awareness among Chinese consumers of a wide range of levels.

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