Shiseido To Acquire Bare Escentuals

There’s gold in mineral makeup…at least for shareholders of Bare Escentuals. Shiseido will acquire Bare Escentuals for approximately $1.7 billion through an all-cash tender offer and second-step merger. The transaction was approved by the boards of directors of both companies by unanimous vote of those directors present and voting.

“Shiseido keeps talking about becoming a global force in cosmetics and toiletries, but so far seems to spend most of its energies on countless internal reorganizations,” observed Happi columnist Colin Hession, managing director of specialist cosmetics and toiletries consultants, Colin Hession Consulting. “Maybe laying out $1.7 billion of shareholders’ money to acquire Bare Essentials will focus management’s minds on actually going out and doing stuff beyond Asia Pacific!”

Under terms of the agreement, Shiseido, through a U.S. subsidiary, will make an offer to purchase all outstanding shares of Bare Escentuals common stock for $18.20 per share—a 40.8% premium to Bare Escentuals’ average closing stock price over the last three-month period ended January 13, 2010, and a 39.9% premium over the closing price of Bare Escentuals’ common stock on January 13, 2010. The offer is expected to close during the first quarter of 2010.

Expressing her commitment to the combination, Leslie Blodgett has agreed to exchange 40% of her existing common stock ownership in Bare Escentuals for a continuing interest in Bare Escentuals following completion of the tender offer.In connection with and as a condition to the offer, Berkshire Partners LLC and certain of its affiliated entities, which collectively hold approximately 16% of Bare Escentuals’ outstanding common stock, have agreed to tender their shares into the offer. In addition, in connection with and as a condition to the tender offer, Leslie Blodgett has entered into an amended license agreement with Bare Escentuals, and Leslie Blodgett and the Chief Financial Officer and Chief Operating Officer of Bare Escentuals, Myles McCormick, have each entered into new employment agreements with Bare Escentuals, all of which will take effect upon the closing of the tender offer.

Bare Escentuals’ business will operate as a separate division of Shiseido and its unique brands will continue to be managed by the current leadership team who are expected to drive future development of the business with the support of Shiseido’s significant resources, particularly given Shiseido’s extensive R&D network around the world. The transaction will strengthen both companies and provide a platform for further growth, ultimately bringing significant benefits to consumers, employees and shareholders by:

• Expanding Shiseido’s brand portfolio into the mineral-based cosmetics market, attracting a wider customer base;
• Creating a complementary multi-channel and truly global distribution network, giving Bare Escentuals greater access to Japan, one of the world’s largest cosmetics markets, as well as other fast-growing Asian markets such as China;
• Strengthening Shiseido’s successful U.S. and European business;
• Maximizing both companies’ production capabilities and R&D resources;
• Delivering a significant premium to Bare Escentuals shareholders; and
• Offering compelling growth prospects and future value creation for Shiseido shareholders.

Shinzo Maeda, president and CEO of Shiseido commented, “This acquisition further enables Shiseido to move towards our goal of becoming a global player representing Asia with its origins in Japan. We have known and admired Bare Escentuals’ excellent team and their achievements for a long time, and look forward to their contribution to our combined group. The operational fit and future growth prospects make this an excellent transaction for our customers, employees and shareholders.”

Leslie Blodgett, chief executive officer of Bare Escentuals, added, “This is an exciting day for all of us at Bare Escentuals and I couldn’t be more pleased to be joining forces with the team at Shiseido. First and foremost, I would like to thank our talented employees, our channel partners, and our loyal customers who have helped build Bare Escentuals from a small niche brand into one of the world’s leading prestige cosmetics companies. Together with Shiseido, we look forward to bringing our mineral-based beauty products to even more women worldwide.”

Bare Escentuals is one of the leading players in mineral-based cosmetics. The company develops, markets and sells cosmetics, skin care, and body care products under brand names that include the popular bareMinerals brand. With over 85% of its revenue generated in the U.S. through retail and direct sales, as a result of this transaction, the company’s international expansion is expected to gain further momentum and will specifically benefit from the growth potential in the highly attractive Chinese and broader Asian markets where Shiseido has a strong foothold.

Shiseido is Japan’s largest cosmetics company, with operations in over 70 countries worldwide, and is one of the oldest cosmetics companies in the world. This transaction is consistent with the company’s roadmap revealed in 2008 for the coming decade which will see Shiseido move from a leading position in Asia to a global player representing Asia with its origins in Japan. Shiseido is already among the top three cosmetics brands in China and other Asian markets and has been steadily increasing its global diversification. Shiseido has gained prominence in the U.S. retail market since the 1960s and operates several R&D facilities in the U.S. Bare Escentuals’ market-leading position will not only complement and strengthen Shiseido’s existing U.S. business, but will also form one of the strategic pillars of Shiseido’s global business platform, taking advantage of the growing global demand for natural cosmetics.