L'Oreal purchases 3 skincare businesses

L'Oreal has acquired three skincare businesses from Valeant. You may recall that from last year Valeant was not just a fallen angel, it was sent to Hades, tossed to Tartaros, booted to the underworld of investing. OK, not that bad, close though. The French cosmetics giant has paid 1.3 billion Dollars in cash, in what represents around that same amount (1.3) in percent of their market cap. For a group of skincare products that produce sales of 168 million Dollars.

Here is the pretty detailed release from Valeant, explaining what the products are that the French company is buying - Valeant To Sell CeraVe, AcneFree And AMBI Skincare Brands To L'Oreal For $1.3 Billion. That is 7.73 times sales. As for L'Oreal themselves, the total group revenues are over 25 billion Euros, with a market cap of nearly 96 billion, the whole group trades on around 4 times sales. Again, it is not necessarily what the sales are, it is what the profits are. Skincare is their biggest business (30 percent for L'Oreal) and should continue to grow over the coming years, as more people get richer in urban settings. Herewith our last report from November - L'Oreal 3Q numbers - steady growth.

We made a couple of points back then, relevant then and relevant now (two months changes nothing): the share price has been a downright disappointment for investors, at least in the very short term. L'Oreal are a whole lot less leveraged than their peers and trade at a pretty big discount relative to their historical multiple. The business also has an element of defensiveness too, hair washing and make up application (and removal) and general facial care is hardly going to go out of fashion. Our conclusion was as follows: "Defensive and growth, this is a good business, the big daddy of the industry. We continue to recommend this stock, we continue to accumulate. Buy."