Money

L'Occitane to raise funds in IPO

By Bei Hu and Wing-Gar Cheng (China Daily)
Updated: 2010-04-20 10:57

Customers browse beauty products at a L'Occitane store in Hong Kong. Its parent may raise $707 million in an IPO.[Agencies]

Hong Kong - L'Occitane Ltd, a French natural-ingredients beauty company, and its parent may raise as much as HK$5.49 billion ($707 million) in an initial public offering in Hong Kong, said three people with knowledge of the sale.

L'Occitane and L'Occitane Groupe SA plan to sell 364.12 million shares, or a 25 percent stake in the company, at HK$12.88 to HK$15.08 each, said the people, who declined to be identified before a public announcement. Half the shares are new and half are on offer from the parent, they said.

Increased consumer spending and strong economic growth in China, Brazil and India will boost demand for natural ingredients-based cosmetics, L'Occitane International said in a report on the Hong Kong stock exchange's website.

The retail value of the global beauty and personal-care industry fell 2.1 percent to $350.3 billion in 2009 from a year earlier, when it rose 8.9 percent, according to Euromonitor International.

"It makes sense for the company to raise funds in Asia because this is the growth market for them," Francis Lun, general manager at Fulbright Securities Ltd in Hong Kong, said in a telephone interview on Monday. "Consumers in Asia are increasing spending on high-end cosmetics and beauty products, and L'Occitane fits into this niche."

The sale values the company at between 18.7 times and 21.9 times the earnings per share estimated by banks involved in the transaction. CLSA Asia-Pacific Markets, HSBC Holdings Plc and UBS AG are managing the offer.

New outlets

Calls made to L'Occitane's Hong Kong office this morning weren't answered. Spokespeople at the investment banks declined to comment. Charis Yau of public-relations firm IPR Ogilvy Ltd didn't reply to an e-mail sent yesterday seeking comment.

"We intend to expand our presence in high-growth emerging markets such as China, Brazil, Russia, India and Mexico," L'Occitane said in its report.

"We intend to open new stores subject to expected rate of investment return, and would not normally establish a new store merely to gain market share."

L'Occitane Groupe will use proceeds from the IPO to repay debt raised during a leveraged buyout, expand its network of new stores globally, develop its factories in France and fund research, development and e-commerce.

The seller of $10 Verbena soap and $66 Mimosa perfume is "well-positioned to benefit from the high-growth natural and organic-cosmetics industry," UBS analysts Erica Poon Werkun and Linda Zhao said in an April 6 note to clients.

The company may increase its number of stores by more than 50 percent in three years to tap the growing demand for "environmentally friendly and ethical products" and the increasing spending on beauty items in emerging economies, the analysts said.

The maker of skin-care products, perfumes and soap, which has stores in more than 80 countries, was founded by Olivier Baussan in 1976 and sold wild rosemary oil in France's Provence region, according to the company's website.

The company has headquarters in Geneva and Luxembourg, it told the exchange.

It has 753 directly managed L'Occitane brand outlets in 27 countries, the company said. It also has 764 stores run by third-party distributors or duty-free operators.

The Asia Pacific region is the second-biggest market for L'Occitane after Europe, with 470 outlets out of a total of 1,517 as of February, the company said.

The last European company to list in Hong Kong was United Co Rusal Ltd, the world's largest aluminum producer.

The shares have dropped 11 percent from its January listing price of HK$10.8.

The stock has risen 0.1 percent since its trading debut on Jan 27 while the benchmark Hang Seng Index has increased by 7.6 percent.

Bloomberg News