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L'Oréal To Boost Luxury Division with YSL Beauté

February 7, 2008

L'Oréal will acquire the shares of YSL Beauté Holdings, including the Roger & Gallet brand, for $1.69 billion. Under terms of the deal, L’Oréal obtains an exclusive and very long-term worldwide license for the use of the Yves Saint Laurent and Boucheron brands in the category of perfumes and cosmetics, under conditions conforming to usual market practice.

More specifically, L’Oréal will take over the licenses for the Stella McCartney, Oscar de la Renta and Ermenegildo Zegna brands, in the category of perfumes and cosmetics.

YSL Beauté reached sales of around $927 million in 2006 with its Yves Saint Laurent brand as well as with its Roger&Gallet, Boucheron, Stella McCartney, Oscar de la Renta and Ermenegildo Zegna brands.

“This proposed agreement represents a great opportunity for L’Oréal and its Luxury Products Division. Yves Saint Laurent is a mythical French luxury brand,” said Jean-Paul Agon, CEO of L’Oréal. “It is admired the world over and is particularly complementary with our current brands. We are convinced that its integration into our Luxury Products Division would speed up its development. This strategic agreement will reinforce our position in the luxury cosmetics market.”

The agreement will be signed once the institutions representing the staff have been consulted. The acquisition was applauded by industry observers.

“A good move for L’Oréal since it adds scale (50%+) to their Prestige business, with a useful new brand franchise in Yves Saint Laurent, which complements–but doesn’t upstage– their current portfolio of Lancôme, Armani, Ralph Lauren, etc.,” said Colin Hession, an industry consultant and Happi columnist.

Mr. Hession went on to note that ideally, from L’Oréal’s point of view, a more U.S. focus would have been nice (70% of YSL sales are in Europe).

“But the opportunity is probably too good to miss,” he added. “It would have suited Estée Lauder down to the ground, giving them much needed scale in both Europe and fragrance at a stroke, but the deal was evidently too rich for them.”

While the deal has yet to close, Mr. Hession said another bidder seems unlikely: “P&G’s prestige team in Geneva have done well with Boss & Lacoste, but probably need emphasis in their domestic market of North America...but never-say-never in this business.”
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