Galderma, originally set up as a joint venture between Nestle and L’Oreal before the latter sold its 50 percent stake in 2014, listed an initial tranche of its stock in late March.
L’Oréal will now acquire a 10 percent stake for an undisclosed premium from Sunshine SwissCo AG – a consortium led by Swedish private equity firm EQT – Abu Dhabi Investment Authority (ADIA) and Auba Investment Pte. Ltd.
Galderma, which had a market capitalisation of almost 16 billion Swiss francs ($18.85 billion) at Friday’s market close according to LSEG data, signed a memorandum of understanding with L’Oréal to work on research and development collaboration.
“It allows us to explore partnering in the fast-growing aesthetics market, a key adjacency to our own pure beauty play,” L’Oréal chief executive Nicolas Hieronimus said of the stake purchase.
“We fully support Galderma’s management and its strategy…respect its independence and are very confident in its long-term growth potential.”
Shares in L’Oréal fell 1 percent while shares in Galderma, which sells Cetaphil, a range for damaged and sensitive skin, sunscreen and medicines for acne, psoriasis and skin cancer, were 4 percent higher at 0705 GMT.
“The stake is positioned as a strategic interest, to facilitate cooperation on product development, but we assume that this is also a way to get closer to Galderma with a view of higher ownership/control over time,” said analysts at Jefferies.
L’Oreal’s dermatological beauty division, which includes the Cerave and La Roche-Posay brands, has been growing in high-double digits for the last couple of years, boosted by social media and consumer interest in science since the COVID pandemic.
But growth in the unit slowed in the second quarter to 10.5 percent, missing estimates. Hieronimus cited growing competition as one of the factors weighing on previously surging growth.
The global aesthetics market is predicted to grow to $25.9 billion from $15.4 billion last year, according to MarketsandMarkets.
L’Oréal said it will not seek to be represented on Galderma’s board of directors. The transaction will be funded with L’Oréal’s available cash and credit lines, and is expected to be completed in the coming days, the French company said.
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