Nestlé expected to sell Skin Health unit to consortium in €9bn deal

By Will Chu

- Last updated on GMT

Nestlé is to enter into negotiations with an investment consortium for the sale of its Skin Health unit for €9bn.

Led by Swedish private equity group EQT and a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA), the consortium look to acquire the Sculptra and Galderma brands that propelled the unit’s net sales to €2.5bn in 2018.

“The proposed transaction will be subject to employee consultations and approval of regulatory authorities and is expected to close in the second half of 2019,” ​said a Nestlé spokesperson.

“The company will provide an update on the use of proceeds and its future capital structure at that time.”

As NutraIngredients reported last September​, the writing was on the wall for the Skin Health unit as the multinational revealed plans for a new “ownership structure​”.  

It’s Board of Directors concluded the unit’s opportunities lay “increasingly outside the Group’s strategic focus”.

Financial pressures came to a head as shareholders demanded a strategy change after disappointing 2017 results, with the firm posting its lowest sales growth in more than twenty years.

Exploring the best ownership structure

"Nestlé Skin Health has made significant progress under its new leadership team over the past 2 years,” ​said CEO Mark Schneider.

“The company has developed convincing growth strategies for each of its business units and regained a competitive cost structure.

“Now is the right time to explore the best ownership structure for Nestlé Skin Health and to consider ways of taking it to the next level." ​

As well as the collagen booster brand Sculptra, the skin health unit makes Cetaphil and Proactiv skin care brands.

The division formed in 2014 when Nestlé bought L’Oreal’s stake in their Galderma dermatology venture.

It operates through three business units: aesthetics and prescription, both under the Galderma brand, and consumer health.

In 2017, the division made headway into the skin microbiome area with a €20m investment with Enterome to create Microbiome Diagnostic Partners (MDP).

In the 50/50 joint venture, Nestlé was to use its diagnostic and commericalisation knowhow to work toward the development of innovative diagnostics concerning the microbiome.

Similarly, Enterome would add its current microbiome diagnostic programs to the partnership.

A well-balanced portfolio

“We are impressed by Nestlé Skin Health’s management team and its achievement in positioning the company as a leading player across its three business units,”​ said Michael Bauer, global head of healthcare at EQT Partners.

“The heritage of the company as a focused skincare company with a comprehensive product portfolio, exceptionally strong brands and high customer loyalty is unique.

Hamad Shahwan Al Dhaheri, executive director of the private equities department at ADIA, said, “Nestlé Skin Health is a leading global business with a well-balanced portfolio of dermatology products, targeting sizeable end-markets with strong underlying growth.

“This proposed transaction aligns with our approach of making strategic investments alongside proven partners to help strong, innovative businesses grow.”

According to Reuters​, EQT and ADIA, which financed the deal via a roughly 50:50 split of equity and debt, faced competition from a consortium of Advent and Cinven, as well as US private equity firm KKR and European fund PAI Partners.

In December 2017, KKR purchased the Unilever’s spreads business for around €7bn.

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