TheFaceShop Cosmetics to LG?

LG Household & Healthcare Ltd., a leading player in Korean detergent and cosmetics market may be looking to expand its presence in cosmetics to compete with Amore.

Affinity Equity Partners Ltd., Hong Kong-based buyout fund, is close to a sale of South Korean cosmetics company TheFaceShop, seeking to raise more than $400 million, according to a Bloomberg News report.

Affinity, which owns 70% of the company, aims to sign an agreement to sell the stake as early as this month, the person said, asking not to be identified.LG is considering buying TheFaceShop, it said yesterday in a regulatory filing, adding that no decision has been made.

The buyout fund is making a second attempt to sell TheFaceShop after talks with Carlyle Group collapsed in July last year because the parties couldn’t agree on a price. Affinity bought control of the cosmetics company in October 2005.

“If the deal is struck and at an appropriate price, it will give LG a good opportunity to expand its cosmetics business,” said Lee Jung In,an analyst with Korea Investment & Securities Co. “TheFaceShop is a top player in the mid-end segment. Its operating margin stands at 19%which is relatively higher than even global peers.”

The acquisition may boost LG’s cosmetic sales by almost 40% and bolster the company’s presence in the low- end market in South Korea, according to a research report by Credit Suisse Group yesterday. Seoul-based LG Household produces cleaning and personal-hygiene products.

Neither Affinity nor LG would comment on the speculation.