L’Oreal to Buy Urban Decay Cosmetics

Today, it was announced that L’Oreal has signed an agreement to buy Urban Decay Cosmetics. Urban Decay was founded in 1996, acquired by LVMH in 2000, then sold to private equity firm Castanea in 2009. L’Oreal owns several recognizable brands in the high-end market like Lancome, Kiehl’s, shu uemura, Giorgio Armani, and YSL. When it comes to this price point, adding Urban Decay into the mix makes a lot of sense of L’Oreal.  The Body Shop seems to be the only similarly-priced brand in their portfolio.  They also own L’Oreal Paris, Maybelline New York, and Essie, which can all be found at mass.

One concern among Urban Decay fans might be its stance on animal testing and how that might change over time.  While ultimately whether you buy or not will depend on your set of rules, but some brands under L’Oreal have no animal testing policies, including Giorgio Armani and The Body Shop (another brand that was acquired) were two readily identified. It is possible for Urban Decay to continue forward with their policy, but the parent company does still conduct animal testing; L’Oreal has significantly reduced its animal testing and has invested millions of dollars into alternative testing methods (source; also see L’Oreal’s developments here), though it has not ceased entirely.

Here is Urban Decay’s response: “Though our ownership is changing, our policies are not. We just spoke to both the CCIC and PETA, and will keep our cruelty-free bunny icons. Urban Decay is staying cruelty-free and proud.”

L’Oréal today announced the signing of an agreement with Castanea Partners to acquire Urban Decay.
Based in Newport Beach California, Urban Decay, created in 1996 by make-up expert Wende Zomnir, has built a reputation based on the concept of “beauty with an edge” and values of femininity and irreverence. The line has star products in the eye category such as the Naked Palette and recently successfully launched its new foundation, the Naked Skin weightless liquid make-up. Urban Decay is popular among the youthful highly-involved cutting-edge consumers who are attracted by the fashion-forward image of the brand. The market for make-up specialist brands represents 44% of the luxury make-up market in the US.

In the fiscal year ended in June 2012, Urban Decay recorded net sales of 130 million US dollars.

“Urban Decay will beautifully complement L’Oréal Luxe’s portfolio of iconic brands. It is the make-up specialist we needed to fully satisfy young women in search of playful colors and inspiration in selective distribution, at an accessible price point. It is totally additional to our existing propositions and as such it will contribute significantly to the growth of the Division in the years to come,” said Nicolas Hieronimus, President L’Oréal Luxe.

Urban Decay is distributed in the key assisted self-service channel which includes among others Ulta and Sephora. It is one of the fastest growing segments in the US luxury retail universe. Urban Decay is also strong in e-commerce with http://www.urbandecay.com/ and http://www.sephora.com/.

Frédéric Rozé CEO L’Oréal USA said, “Thanks to the acquisition of Urban Decay, the Group will strengthen its position in two very dynamic distribution channels in the USA, ie assisted self-service and e-commerce. We look forward to this new and exciting opportunity.” In the US, Urban Decay will report to Carol Hamilton, President of L’Oréal Luxe USA.

“L’Oréal’s strong innovation capabilities and presence in every channel of distribution will enable Urban Decay to reach its full potential in the marketplace,” added Tim Warner, General Manager, Urban Decay. “Together, we have great ambitions for the future.”

The closing is subject to regulatory approval which is expected by the end of the year. — L’Oreal