Clariant to acquire Lucas Meyer Cosmetics

For a total consideration of $810 million, Clariant agrees to acquire Lucas Meyer Cosmetics to strengthen its position as a true speciality chemical company.

Clariant, a sustainability-focused specialty chemical company, has announced that it has agreed to acquire Lucas Meyer Cosmetics, a leading provider of high value ingredients for the cosmetics and personal care industry, from International Flavors & Fragrances (IFF) for a total cash consideration of $810 million on a debt-free, cash-free basis, equivalent to an EV/ reported EBITDA multiple (LTM August 2023) of 16.3x. The proposed transaction is subject to regulatory approvals and customary closing conditions and is expected to close in the first quarter of 2024. 

“The proposed acquisition of Lucas Meyer Cosmetics marks another major step forward for Clariant’s purpose-led growth strategy. It will strengthen our position as a true speciality chemical company, our exposure towards consumer markets, and our footprint in North America, while supporting our goal to accelerate customer and sustainability driven innovation. In addition, Lucas Meyer Cosmetics brings a highly experienced leadership team with an excellent track record,” said Conrad Keijzer, CEO of Clariant. “By combining our personal care ingredients portfolio with Lucas Meyer Cosmetics, Clariant will become a leader in the high value cosmetic ingredients space, one of the most attractive, profitable, and fastest-growing speciality chemicals markets. With this step, we will build on our successful track record of pursuing and integrating bolt-on acquisitions to enable value creation and profitable growth.” 

Clariant Applications Lab, New Jersey, USA (Image: Clariant)

Strong synergies for a perfect fit

“Lucas Meyer Cosmetics represents a significant, exciting growth opportunity for Care Chemicals. It is a perfect fit with our business, given the complementarity of our customers and products. Combining our respective strengths, including the R&D and innovation capabilities of Lucas Meyer Cosmetics, backed by a strong brand, will enable us to deliver a strong increase in annual sales to $180 million in 2028 from around $100 million currently. We look forward to welcoming our new colleagues after closing and leveraging our respective capabilities, expertise, and passion,” said Christian Vang, President of the Clariant Business Unit Care Chemicals and the Americas region. 

Lucas Meyer Cosmetics, founded in 1999 and headquartered in Québec, Canada, is a leading player in the high value active and functional cosmetic ingredients market. Lucas Meyer Cosmetics’ competitive edge stems from its superior marketing and innovation capabilities, including global R&D and regional application centers, which translate into strong financial performance with $100 million of revenues and highly attractive profitability. The business is also highly cash generative due to its asset-light model and outsourced production. In addition, Lucas Meyer Cosmetics has a unique customer-centric business model, resulting in strong brand recognition among customers around the world. 

Strong strategic and financial rationale 

The acquisition is underpinned by a compelling strategic rationale given Clariant’s and Lucas Meyer Cosmetics’ complementarity in customer portfolio, product portfolio, regional strongholds and capabilities in R&D and marketing, making the combination of Clariant and Lucas Meyer Cosmetics a uniquely positioned solutions provider for high value personal care brands. The proposed transaction allows Clariant to further transform its portfolio towards high-growth, high-margin and highly cash generative specialty chemicals businesses and consumer end-markets underpinned by accelerating demand for natural and sustainable products. It will increase Clariant’s exposure to the active and functional cosmetic ingredients market and strengthen its North America presence in the Care Chemicals business unit. 

The transaction will create considerable value for Clariant’s shareholders. With 10% sales growth1, outstanding profitability and high cash conversion, Lucas Meyer Cosmetics is accretive to Clariant’s growth, margin and cash flow profile and exceeds Clariant’s financial target metrics for 2025. The transaction is expected to be mid-single digit percentage accretive to EPS2 from year one onwards. Given the strong strategic fit and high complementarity of the businesses, Clariant’s ambition is to grow Lucas Meyer Cosmetics’ annual sales from $100 million to $180 million by 2028. 

Financing and expected timetable 

The funding for the acquisition has been secured by a fully committed bridge facility which is intended to be refinanced soon after completion. On completion, Clariant’s net leverage is expected to moderately increase to 2.8 times EBITDA including pension and lease liabilities, preserving the group’s prudent capital structure and balance sheet strength. Clariant expects no change to its investment grade credit rating. 

The acquisition is expected to close in the first quarter of 2024. 

References:

  1. CAGR 2015-2023E 
  2. On an adjusted basis including full run-rate synergies and excluding non-recurring, transaction-related costs  

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