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■ The agreed sum is KRW 55 billion.
■ It is expected to maximize synergy for LG H&H in the color cosmetics market.
LG Household & Health Care, Ltd. (CEO: Suk Cha) announced on October 27, 2011 that it concluded an agreement to acquire the cosmetics business of VOV Corp. for KRW 55 billion.
In 2010, VOV recorded KRW 44.7 billion in sales and KRW 4.4 billion in operating profit. The company, with 3.0% of market share, is the third biggest color cosmetics brand in Korea, following Etude and MAC
With this acquisition, LG H&H is poised to optimize its OEM manufacturing, which amounts to KRW 200 billion in sales, through the integrated management of color cosmetics products from its brands, LG H&H, TheFaceShop and VOV.
LG H&H expects the following benefits from the acquisition: ▲ increased sales via expanded business network in China and other Asian markets; ▲ reduced cost from the diversification of OEM sources and enhanced negotiation power; ▲ synergistic effects such as the more efficient management of selling, general and administrative expenses.
The company plans to utilize the acquisition as an opportunity to enhance its competitiveness in the color cosmetics market. It seeks to bring the currently dispersed color cosmetics products under the Color Cosmetics division, seek counsel from outside makeup professionals and introduce new brands.
Furthermore, considering that the barrier to entry and the level of competitiveness are relatively lower in color cosmetics than in skin care, LG H&H expects to achieve economy of scale by consolidating its color cosmetics products, which are currently scattered among separate brands.
The reinforced Color Cosmetic Division will provide color cosmetics to LG H&H and TheFaceShop, develop color-oriented brand shops and supply color cosmetics products for overseas expansion.
[Background of VOV Acquisition]
In 2010, skin care and color cosmetics products each constituted 65% and 35% of the global cosmetics market. Over the next five years, the color cosmetics segment is forecasted to surpass the skin care segment in annual growth (source: Euromonitor).
Considering that color cosmetics accounts for only 25% of the Korean market against skin care’s 75%, it is likely to expand rather rapidly in the medium and long terms.
LG H&H has thus far focused on skin care products and the breakdown of its cosmetics sales is 85:15 for skin care and color cosmetics, respectively. The acquisition of VOV is expected to stimulate the company to increase its competitiveness and presence in the color cosmetics market.