Nestle put the skin health unit up for sale last September as the group moved to jettisoned underperforming businesses, following years of slowing growth as many consumers favored fresh foods over packaged goods. Nestle was also under fire from activist investor Daniel Loeb’s Third Point, which asked for a faster overhaul in July. A year later, the US hedge fund has generated very good returns on its Nestle stake, leading Loeb to praise Schneider’s performance this year.
Nestle Skin Health (NSH), which sells Cetaphil and Proactiv skin care products, Restylane wrinkle fillers and prescription dermatology medicines, had sales of 2.8 billion Swiss francs last year (about $2.8 billion). Nestle created the unit, which will remain headquartered in Switzerland, in 2014 when it bought L’Oreal’s stake in their Galderma joint venture. Under former Chief Executive Paul Bulcke, skin treatments were part of Nestle’s push into higher-growth health products to counter a slowdown in its traditional food business, but performed poorly, leading to one-off costs and restructuring.
A reorganization over the last two and half years returned it to double-digit sales growth in the first quarter of 2019. Analysts said the price tag was attractive for Nestle at an enterprise value-to-sales multiple of 3.6 times, or a multiple of roughly 20 times expected core earnings. The unit, which will be rebranded Galderma, is expected to post earnings before interest, tax, depreciation and amortization of roughly 550 million Swiss francs this year and of more than 600 million next year, a person close to the matter said.
“EQT focuses on quality businesses. We have a lot of good ideas how to develop Nestle Skin Health into a pearl and then make our return,” EQT partner and co-head of private equity Marcus Brennecke told Reuters. “We will strengthen Galderma’s board with relevant industrial expertise to develop each of the three business units to their full potential. A couple of prescription drugs are theoretical blockbusters with large business opportunities,” he said