Major South Korean conglomerates are seeking new growth opportunities in the cosmetics industry.
SK Group is in talks with Hyundai Department Store Group over the sale of its cosmetics and health food business SK Bioland, sources said on June 9.
SK Group has explored the potential sale of the company over the last several months during which SK Group had been approached by many other major domestic conglomerates. Among them were Shinsegae Group and LG Group, according to sources.
Shinsegae Group reportedly also sat down with SK Group for negotiations earlier this year. But the deal apparently collapsed after the two parties seemingly failed to agree on the company’s valuation, sources said.
SK Bioland is the largest producer of raw materials for cosmetics in the country. With synergies that could be created from the acquisition it was understandable that Shinsegae Group considered buying the company, industry watchers said.
Shinsegae International, the fashion arm of Shinsegae Group, acquired the beauty brand VIDIVICI in 2012. The revenue from VIDIVICI has increased nearly 190 times in the past eight years largely due to strong sales growth in the Chinese market. The company also launched its own cosmetics brand Yunjac in 2018 in an effort to strengthen its position in the market.
LG Group’s LG Household & Health Care has been seeking to expand its production of raw materials for cosmetics since 2016 when it acquired a smaller company specializing in this area. This is likely the reason behind its interest in buying SK Bioland.
A high level of interest in SK Bioland suggests that domestic companies are looking to the cosmetics business as a source of new growth opportunities. They seemingly want to build a vertically integrated business model across the value chain that includes production, distribution and sale of cosmetics.
Deals in the sector have also increased lately. Handsome Corp, the women’s apparel maker of Hyundai Department Store Group, bought a controlling stake in Cleangen Cosmeceutical in May. Beauty giant Amorepacific also announced a partnership with Rationale Group by acquiring 49 percent of the Australian company last month. LG Household & Health Care completed the acquisition of Physiogel’s business rights for the Asian and North American regions from British pharmaceutical firm GlaxoSmithKline at the end of May. (Reporting by Hyeran Kim)