Blackstone and Goldman Sachs are buying the company for nearly US$2 billion
L’Occitane takes a new step: on Monday (29th), it announced its privatization after months of speculation. Blackstone and Goldman Sachs are set to finance the US$1.8 billion deal, valuing the company at US$6.4 billion.
Reinold Geiger, L’Occitane’s chairman and majority shareholder, stated that the transaction ‘will enable us to focus on rebuilding the foundation for the long-term sustainable growth of our company.’
L’Occitane has been publicly traded on the Hong Kong Stock Exchange for 14 years. Back in 2010, many global companies viewed the Chinese stock exchange as an attractive opportunity due to the growing wealth of the country’s consumers, who are increasingly interested in luxury items. However, over the years, the market performance has not been as good as expected.
At the same time, according to Ivan Su, a senior equity analyst at investment firm Morningstar, beauty conglomerates listed on the Paris and New York stock exchanges, despite having a similar profit trajectory, command significantly higher valuations. The average price-to-earnings multiple in L’occitane Hong Kong hovers around nine, whereas in the United States, it frequently exceeds 20.
L’Occitane also faces challenges beyond L’occitane Hong Kong. Its long-term strategic plans don’t always align with what shareholders want; they demand rapid profit growth. Investors have been displeased with L’Occitane’s growth plans. The company’s stock fell 15% in June 2023 after spending €100 million on marketing to grow its brands, such as L’Occitane en Provence and Elemis.
The company might also consider reducing the number of physical stores around the world, discontinuing certain product lines, and eliminating underperforming items to improve profits.
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