French luxury house and Gucci owner Kering buys House of Creed in cosmetics push

The all-cash deal will use funds controlled by BlackRock Long Term Private Capital Europe and Creed chairman Javier Ferran

France's Kering formed Kering Beaute in February, as it seeks to tap into the potential of the growing luxury cosmetics sector. Reuters

Kering, the French luxury house that owns the Gucci brand, has struck a deal to acquire 100 per cent of high-end fragrance label House of Creed, marking the first acquisition of its recently formed cosmetics unit.

The all-cash deal between Kering Beaute and Creed will utilise funds controlled by BlackRock Long Term Private Capital (LTPC) Europe and Creed chairman Javier Ferran, Kering said in a statement on its website on Monday.

Creed, best known for its Aventus fragrance, was sold to BlackRock LTPC and Mr Ferran in 2020, after 250 years of family ownership.

The companies did not disclose the value of the acquisition. The deal is expected to be finalised in the second half of 2023 after clearing regulatory requirements, Kering said.

The acquisition is estimated between €1 billion and €2 billion ($1.1 billion to $2.2 billion), Reuters reported, citing RBC Capital Markets analyst Piral Dadhania. He maintained his buy rating on Kering's stock, which closed flat on Monday.

“The acquisition of Creed represents Kering Beaute’s first strategic initiative, and demonstrates our commitment to developing a strong position in the luxury beauty segment,” Francois-Henri Pinault, chairman and chief executive of Kering, said in the statement.

"I am thrilled that today our stories and values come together around this spirit of family entrepreneurship and excellence to accelerate our journey in beauty," Mr Pinault, who is married to actress Salma Hayek, said.

Kering Beaute was formed in February as its parent company sought to tap into the potential of the growing luxury cosmetics sector. Raffaella Cornaggia, a former executive at US industry major Estee Lauder, was brought in as chief executive.

She has been tasked to develop the beauty categories of Kering's stable of top-end brands, which include Alexander McQueen, Balenciaga, Bottega Veneta, Boucheron, Brioni and Yves Saint Laurent.

“Creed has a unique positioning in the fragrance market. We see a very compelling rationale and mutual strategic benefits in terms of expertise, network and geographical footprint,” Ms Cornaggia said.

The potential of the cosmetics industry – and the luxury segment in general – has led to a number of major acquisitions in the past years.

The most recent significant deal was when French cosmetics company L'Oreal acquired Australian luxury brand Aesop from its Brazilian parent Natura for $2.53 billion.

The deal was the biggest-ever acquisition for Paris-based L'Oreal, the world's biggest cosmetics company, after its $1.7 billion buyout of YSL Beaute in 2008, according to Dealogic.

In November, New York-based Estee Lauder bought luxury brand Tom Ford for about $2.8 billion, including debt, marking its biggest acquisition.

In 2020, VF Corporation – which owns the Vans, Timberland, Altra and The North Face brands – bought streetwear company Supreme for $2.1 billion. In 2018, Capri Holdings bought Italian luxury fashion brand Versace for $2.12 billion.

Revenue in the global luxury cosmetics market was estimated at more than $50 billion in 2022 and is projected to grow to around $67.6 billion by 2028, at a compound annual rate of nearly 5 per cent, latest available data from research firm iMarc Group shows.

“The high-end luxury fragrance segment benefits from strong market dynamics fuelling double-digit growth, high profitability and significant revenue recurrence driving long-term resilience through the cycle,” Kering said.

Kering in April reported that its first-quarter group revenue rose 2 per cent to nearly €5.1 billion. The company was working to “augment the desirability of our brands and raise their profile in key markets”, Mr Pinault had said.

Creed, meanwhile, posted around €250 million in sales last year.

“This transaction is highly emblematic of BlackRock LTPC’s strategy of investing in high-quality companies and actively collaborating with management teams to create value,” said Andre Bourbonnais, global head of long-term private capital at BlackRock.