L'Oréal buys Yves Saint Laurent Beauty<

While all eyes were on the Clarins family group, L'Oréal created a surprise by announcing last night the project to take over Yves Saint Laurent Beauté (YSL Beauté) and Roger & Gallet, subsidiaries of PPR. The group led by François-Henri Pinault has indeed received a firm offer of 1.15 billion euros from L'Oréal to take over a highly coveted multi-brand company on the market. Exclusive negotiations are engaged.

This agreement provides for the use under a very long-term license by L'Oréal of the Yves Saint Laurent and Boucheron brands in the field of perfumes and cosmetics. L'Oréal will also recover the licenses of the Stella McCartney, Oscar de la Renta and Ermenegildo Zegna brands for their perfume and cosmetics activity. But the Yves Saint Laurent, Boucheron and Stella McCartney brands remain the full property of PPR. “Through this proposed strategic agreement with the world's number one cosmetics company, Gucci Group has chosen to provide YSL Beauté with the means to fully exploit its growth potential,” said François-Henri Pinault, CEO of PPR.

Yves Saint Laurent Beauté generated sales of 626 million euros in 2006 for current operating income of 32 million euros. This acquisition would enable L'Oréal to consolidate its number one position in terms of market share in perfumery. It notably includes the Lancôme, Diesel, Armani and Cacharel brands.

Clarins isolated

It would also strengthen in high-end cosmetics where the group is very established, with in particular the brands Biotherm, Vichy, La Roche Posay. The challenge for L'Oréal will be to make these two "great competitors" coexist. “Yves Saint Laurent is a mythical brand of French luxury, it enjoys great international influence and it is very complementary to our brands,” said Jean-Paul Agon, CEO of L'Oréal, in his press release.

For PPR, the choice to sell YSL Beauté puts an end to a long suspense. For several months, rumors have been rife about the future of this cosmetics division, which has improved its financial performance in recent years. Current operating profit increased from 15 million euros in 2005 to 32 million at the end of 2006.

Two hypotheses have been circulating since last summer. In a cosmetics market that is consolidating, YSL Beauté seemed increasingly isolated. A move was expected.

The scenario of a takeover of Clarins participated in the soaring of the title of the cosmetics group controlled by the Courtin family. But at the same time, Clarins hinted that it intended to carry out acquisitions. What fuel another rumor: the acquisition of YSL by Clarins.

PPR has indeed made a strategic choice, but favors a sale to the L'Oréal group. A movement that will give birth to a very large luxury cosmetics, but which, in turn, will isolate Clarins.