On 25th January 2024, Suave Brands Company announced their acquisition of Chapstick for approximately $510 million. Suave Brands Company is currently a portfolio company of Yellow Wood Partners, with a business model that targets discount stores in the production of personal care products. The deal is being advised by Citigroup for ChapStick. Haleon, ChapStick’s previous owner and renowned British multinational consumer healthcare company, accepted the deal at a value of $430 million as well as approximately $80 million worth of passive minority interest in the Suave Brands Company.
Yellow Wood Partners is a mid-market private equity firm with exclusive operations in the consumer industry, currently with 35 active portfolio companies and $1.8 billion in assets under management. Their exclusivity to consumer private equity is testament to deep-rooted industry knowledge that they aim to utilise as part of the acquisition of ChapStick. Suave has been a portfolio company of theirs since May 2023, prior to which Suave Brands was internationally owned by consumer goods conglomerate Unilever. Yellow Wood’s acquisition of ChapStick is actually the group’s fifth corporate carve-out transaction in the last 4 years. The strong portfolio of consumer goods that Suave offers proves to be a perfect complement to ChapStick’s industry niche in the lip balm industry, allowing them to capture a significant portion of a loyal consumer base that is associated with ChapStick. In fact, a Yellow Wood partner proclaimed that “Chapstick products are purchased by one out of every five households in the United States”, reflective of their very loyal consumer base and strong market share. In 2023, ChapStick generated £112 million in revenue.
Another significant factor for this acquisition lies with that of ChapStick’s former owner Haleon. Haleon was initially borne out of a joint venture between GSK and Pfizer in 2019, after which it was eventually spun off into its own entity at 2022 as a UK listing. Ever since, the strategic focus of Haleon has been that of streamlining the company by disposing the non-core brands and pursuing a restructuring programme. Last year, Haleon also sold foot cream brand Lamisil for £235 million. As part of Haleon’s 2023 full year results presentation, they announced a £150 million expenditure in restructuring costs throughout 2023 and 2024, as well as a projected £300 million in cost savings by 2025. As Haleon’s chief executive reported, “While ChapStick is a great brand … it is not a core focus for Haleon”. Selling the brand will allow Haleon to simplify the business and pay down debt quicker.
The deal is not an ideal circumstance for Haleon, as they had initially hoped to fetch roughly $600 million for ChapStick. However, following negotiations, both parties amicably agreed on a valuation of $510 million for which the deal is now valued at.
Written by: Siddh Patel
Sources: FT, Reuters, Mergerlinks
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