Private equity firm CVC Capital Partners announced its purchase of the perfume and cosmetics retailer Douglas. The German retailer had recently announced its plans for an initial public offering, but CVC Capital Partners managed to snatch the company by improving its offer.
From One Private Equity Firm to Another
CVC Capital Partners will buy the retailer from its fellow private equity firm, Advent. The US-based private equity firm bought the company a few years ago, in a sale that saw the chain delist from the Frankfurt stock exchange.
The Advent takeover was made together with the Kreke family, which will continue to remain as a minority shareholder in the company. According to reports, the family will hold on to a 15% stake. At the time of the Advent takeover, Douglas was making a loss, but the PE firm has managed to turn around the company’s fortunes.
Advent has helped the company in its expansion plans, as the chain is hoping to become Europe’s largest perfume retailer. It has recently acquired the French perfume chain Nocibe and sold its confectionary stores, focusing solely on the perfume and cosmetic sector.
Douglas currently has over 1,900 stored across 19 European countries. It has an estimated 17% market share in Europe, according to a KamCity report.
Continuing the Expansion Plans
CVC Capital Partners is expected to help the chain it its expansion aims. Henning Kreke, the chief executive of Douglas, said in the statement, “Douglas has the strength to become a global brand and we will be looking at growth opportunities outside of the European market.”
Søren Vestergaard-Poulsen, managing partner at CVC Capital Partners said in the official statement, “Douglas is a market leader with attractive growth prospects due to its strong management team, extensive store network, leading online presence and dedicated employees. We are very much looking forward to working with the family and the management to grow this European beauty champion further over the long term.”
Furthermore, the private equity firm is well positioned to help the company grow, as it has previous expertise in the sector. In 2007, CVC Capital Partners bought a majority stake in a Danish health and beauty retailer giant, Matas. The company listed in 2013, in the first Danish private equity listing since 2010.
Scrapping the IPO Plans
The deal means the company has scrapped its plans for an IPO in the Frankfurt stock exchange. Kreke explained the turnaround by saying, “An IPO would have been an interesting option but only the second best for the company”.
According to the Wall Street Journal, Advent was expecting a valuation of €3 to €3.5 billion with the IPO. The perfume and cosmetic retailer’s financial records show the company’s sales stood at €1.5 billion for the first half of the 2014/2015 fiscal year. Douglas’ adjusted earnings before interest, tax, depreciation and amortisation stood at around €180 million.
Although the financial details of the deal weren’t made public, a source told Reuters the purchase price was close to €3 billion. This would mean Advent didn’t manage to reach the valuation it was aiming for with the IPO.
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