Huawang wins "Bao" Chinese cosmetics market changes

The Kanebo bid battle that lasted for nearly three years finally came to an end.

Recently, Kao Corporation, the largest household goods giant in Japan, officially announced that it will buy Kanebo Cosmetics Co., Ltd. for a price of 410 billion yen (US$3.5 billion), and it will become a new owner of this globally renowned makeup brand. Analysts believe that Kao would not hesitate to take over Kanebo and will have a profound impact on the current pattern of the world cosmetics market.

For Kanebo, this is a very ironic result. As early as 2003, Kao proposed to Kanebo to purchase its cosmetics business. The negotiation was very smooth but was rejected by cold talks at the last moment. Kanebo, who was caught in a huge loss, subsequently sought financial assistance from the Japan Industrial Regeneration Agency (IRCJ). Last year, Kanebo Group spun off the cosmetics business and operated independently.

This time, Kao teamed up with Advantage Partners, MKS Partners, and UNISON Capital to fight off two other strong rivals: RHJ International, a subsidiary of Ripplewood, the SMBC Alliance of Yamato Securities, and the Jafco Venture Capital-CVC Capital Partners Alliance. . "The Kao League has the highest bid among all competitors." said Suzuki Suzuki, Chairman of IRCJ, responsible for the reorganization of Kanebo. However, another important reason to choose Kao is that the latter proposed a complete brand redevelopment plan for Kanebo. In the future, the brand “Kanebo” will be fully managed by Kao and it is expected to introduce new products within two years. "Not only will Kanebo's name be retained, but the company's management will also remain in office. This is a great encouragement to the company's morale." Suzuki said.

According to the agreement, Kao will invest 263.4 billion yen to take an 86% stake in Kanebo Cosmetics Co., Ltd. and purchase all the intellectual property of the latter at 148 billion yen. In addition, Kao will invest 15.6 billion yen to buy 14% of the shares of Kanebo Group, and the remaining shares will be bought by the three major investment partners. The specific amount is unknown. In recent years, the Kanebo Group has successively sold some of its loss-making businesses and currently specializes in food and pharmaceuticals businesses.

Kato President Motoki Ozaki said he hopes the merger will help the company stand out in the highly competitive cosmetics market. Motoki Ozaki added that Kanebo will still operate as an independent brand entity and that it is not yet planning to restructure the company. It is reported that Kanebo's sale process has been officially launched next month.

This transaction will also become the sixth largest merger between Japanese companies this year. After taking Kanebo, Kao's cosmetics sales will almost quadruple to 288 billion yen. It will leapfrog to Shiseido's second-largest Japanese cosmetics manufacturer, and thus have the ability to directly compete with the industry leader. . At present, Kao is ranked fourth in Japan solely for its cosmetics sales.

Analysts say that only 8% of Kao’s total revenue comes from the cosmetics business. This situation will change completely after Kanebo’s entry. With Kanebo's approximately 20,000 stores in Japan, and popular high-end skin care and makeup brands such as Twany, Lunasol and RMK, Kao will launch a strong challenge to Shiseido’s leading position.

At the same time, the combination of Kao and Kanebo will greatly enrich the company's existing product line and strengthen its brand cohesion, and provide an "accelerator" for overseas markets that are more lucrative. At present, whether it is Kao or Kanebo, it is difficult to expand the international cosmetics market and it falls far behind Shiseido. Especially in the fast-growing Chinese market, Shiseido has become a thriving Japanese makeup brand.

“The acquisition of Kao will affect the cosmetics market in China,” said Takashi Akabane, senior analyst at the Tokai Tokyo Research Center. “The future of the Chinese market is expected to form a three-fold relationship between Shiseido, L'Oreal and Kao. Although the absolute price is more expensive, If you can catch up with Shiseido, the deal is worth the money for Kao."