L’Oréal (OREP.PA) announced on Monday that it will acquire a 10% stake in Swiss skincare company Galderma (GALD.S) from a consortium of major shareholders. This move allows the French beauty giant to tap into the rapidly growing medical cosmetics market.
Galderma, initially established as a joint venture between Nestlé (NESN.S) and L’Oréal, saw L’Oréal sell its 50% stake in 2014. In late March, Galderma listed its initial stock tranche.
L’Oréal’s acquisition of the 10% stake will be from Sunshine SwissCo AG, a consortium led by Swedish private equity firm EQT, Abu Dhabi Investment Authority (ADIA), and Auba Investment Pte. Ltd. The financial details of the transaction were not disclosed.
Galderma, with a market capitalization nearing 16 billion Swiss francs ($18.85 billion) as of Friday’s market close, has signed a memorandum of understanding with L’Oréal to collaborate on research and development.
“This investment allows us to explore partnerships in the rapidly expanding aesthetics market, a crucial complement to our core beauty business,” said L’Oréal CEO Nicolas Hieronimus. “We fully support Galderma’s management and strategy, respect its independence, and have great confidence in its long-term growth potential.”
At 0705 GMT, L’Oréal shares had fallen by 1%, while Galderma shares, known for products like Cetaphil, sunscreen, and treatments for acne, psoriasis, and skin cancer, rose by 4%.
Analysts at Jefferies commented, “The stake is seen as a strategic interest to facilitate cooperation on product development, but it may also pave the way for L’Oréal to increase its ownership or control over time.”
L’Oréal’s dermatological beauty division, which includes brands like CeraVe and La Roche-Posay, has experienced high-double-digit growth in recent years, driven by social media and increased consumer interest in scientific skincare since the COVID-19 pandemic. However, growth in this division slowed to 10.5% in the second quarter, missing estimates, with Hieronimus citing increased competition as a factor.
The global aesthetics market is projected to grow from $15.4 billion last year to $25.9 billion, according to MarketsandMarkets.
L’Oréal stated it will not seek a seat on Galderma’s board of directors. The transaction, to be funded with L’Oréal’s available cash and credit lines, is expected to be finalized in the coming days.
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