Skin Health exit: Nestlé enters into US$10.1 billion negotiations to sell unit to buyout funds

16 May 2019 --- Nestlé has entered into exclusive negotiations with a consortium led by EQT and a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) for the sale of Nestlé Skin Health for a value of CHF 10.2 billion (US$10.1 billion). Nestlé Skin Health had net sales of CHF 2.8 billion in 2018. Nestlé started exploring strategic options for its Skin Health unit in September 2018, after the company’s board concluded that the future growth opportunities of Nestlé Skin Health increasingly lie outside the group’s strategic scope. The company had come under increased pressure from shareholders to overhaul its strategy following disappointing 2017 results, with the company reporting its lowest sales growth in more than two decades.

“The transaction is still subject to employee consultations and approval of regulatory authorities. The proposed transaction is expected to close in the second half of 2019. The scope of transaction negotiations include the entirety of Nestlé Skin Health,” Peggy Diby, Senior Corporate Spokesperson for Nestlé, tells NutritionInsight. 

If completed, the deal would be Europe’s biggest so far this year, Bloomberg reports. It could put Nestle in a strong position for further acquisitions, though “large ones would probably face antitrust issues given the Swiss company’s market position in food and beverages.” 

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

Nestlé Skin Health provides science-based solutions to meet the specific skin health needs of healthcare professionals, patients and consumers. The platform offers a range of leading medical and consumer brands through three complementary business units in prescription, aesthetics and consumer care. Headquartered in Lausanne, Switzerland, Nestlé Skin Health employs more than 5,000 people across 40 countries.

During its regular strategy review last year, the Board of Directors confirmed the company’s strategic direction to sharpen its focus on food, beverage and nutritional health products.

“Nestlé Skin Health has made significant progress under its new leadership team over the past two years. 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,” said Mark Schneider, CEO, at the time.

The move raises questions about the future of its ties with the world’s biggest cosmetics firm, L’Oreal. In February, L’Oreal declared its readiness to buy Nestle’s 23 percent stake in the firm were it to sell, saying it had access to cash and funding at its disposal.

L’Oreal said it could finance a purchase of the holding, worth approximately US$27.4 billion, with cash, by selling its stake in French drugmaker group Sanofi or through borrowing if needed, Reuters reported at the time.

Although Nestlé has ruled out increasing its stake in L’Oréal, it has also disregarded calls to decrease its stake. 

As part of the strategic review, the Board re-affirmed and emphasized the strategic importance of Nestlé Health Science, its nutritional health business which focus on medical nutrition and consumer health products.

Last year, Nestlé acquired Atrium Innovations, thereby expanding and complementing its line of nutritional products such as the brands' BOOST, Nutren, Meritene and Peptamen. 

Nestlé intends to continue to allocate “significant resources” to this growth area.

Nestlé Skin Health provides science-based solutions to meet the specific skin health needs of healthcare professionals, patients and consumers.

It offers a range of leading medical and consumer brands through three complementary business units, including Epiduo and Soolantra in Prescription, Restylane and Azzalure in Aesthetics, Cetaphil and Proactiv in Consumer Care.