Magic Holdings International Ltd. is the “ideal fit” for L’Oreal SA’s existing China business and the deal also gives Magic an “ideal partner” to expand into new markets, the companies said in a joint filing on Thursday.
Magic is the market leader in the rapidly expanding product category of facial masks, with 26 percent market share last year, according to AC Nielsen data.
“Facial masks are one of China’s beauty market’s fastest growing areas with very promising development prospects,” L’Oreal said in a statement. “L’Oreal intends to develop this Chinese brand by contributing its science based expertise.”
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Emerging markets such as China have become increasingly important for the French cosmetics maker, which is trying to counter stagnant growth in its traditional markets. Last year the Paris-based company made more money from “new markets,” which include Asia, Latin America, the Middle East, Africa and Eastern Europe, than from North America or Western Europe.
China’s economic growth has slowed from double-digit rates but remains much higher than developed economies.
Magic’s sales rose 29 percent last year to $200 million.
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The French company is offering 6.30 Hong Kong dollars (81 cents) for each Magic share. Magic’s stock price soared 18 percent on the Hong Kong stock exchange to HK$5.98 on Friday.
Six key shareholders holding 62.3 percent of Magic are already supporting the deal, which needs approval from China’s Ministry of Commerce.
L’Oreal has 3,500 staff, a research centre and two factories in China.