French cosmetics giant L’Oreal’s $843 million bid to acquire Magic Holdings International was approved by China’s commerce ministry. L’Oreal expects to complete the acquisition in the second quarter of 2014.
Last week, L’Oreal announced it will no longer sell the Garnier brand in China, citing slower sales. Industry analysts believed the downfall of Garnier was due to weak positioning.
The Magic acquisition gives L’Oreal an instant top-selling facial mask brand in China. With Magic’s 288 distributors in 32 provinces and regions in China, the acquisition will also give L’Oreal a greater distribution reach for its own brands in China.
Beauty and personal-care product sales was projected to grow by 8 percent to $34 billion in 2013, according to Euromonitor. This sector accounts for more than 25 percent of luxury sales in China and has great potential.
“China is still a 1.3 billion population market and personal care is growing,” Norman Chan of Calibre Asset Management Ltd told Bloomberg. “The faster growing markets are the low- to mid-end, which the domestic companies would have a better foothold in than L’Oreal,” said Chan.
Facial masks are one of the fastest-growing areas in China’s beauty market, with “very promising development prospects,” L’Oreal said.
Magic, which sells the MG-branded beauty products such as facial masks with snail essence, has 26.4 percent share of the facial mask market in China in 2012 according to AC Nielsen data.