CITIC Capital completes China cosmetics carve-out

The private equity firm completed the carve-out in partnership with UCO’s existing management team, which will continue to lead the business. It is CITIC’s seventh carve-out within the past two years and the second from a Chinese company.

UCO, which was established in 2010, provides end-to-end digital solutions and e-commerce services that help brands build their online presence. For the year ended December 2017, revenue and net profit came to RMB1.1 billion and RMB11.7 million. For the nine months ended September 2017, these figures were RMB782.9 million and RMB9.9 million, respectively.

Qingdao KingKing produces candle and craft products and cosmetics. The company claims to have the cosmetics industry’s largest procurement platform as well as its largest offline retail store network with more than 9,500 outlets. Despite posting a 16.7% year-on-year increase in revenue to RMB5.45 billion in 2018, net profit fell 74% to RMB10.4 million. Qingdao KingKing responded by focusing on new retail.

The company said in a filing in February that it is building an online-to-offline smart retail services platform – in collaboration with Tencent Holdings, which is one of CITIC’s shareholders – that covers procurement, warehousing and logistics, and marketing and distribution. UCO wasn’t deemed core to these efforts, hence the decision to divest.

“The beauty sector is one of the fastest growing consumer sectors with e-commerce being the growth engine for many of the global and local beauty brands in the China market. UCO is known for its deep understanding of digital and e-commerce, innovative and technology-enabled solutions, and dedication in quality service,” Hanxi Zhao, a senior managing director at CITIC, said in a statement.

The GP’s other carve-outs include the McDonald’s business in mainland China and Hong Kong, Pearson-controlled Wall Street English, Ansell’s sexual health unit, a database division of Euromoney Institutional Investor, Ajinomoto’s Amoy Food, and China Merchants Loscam. All were acquired from international sellers apart from Loscam, a pallet and packaging business controlled by China Merchants Group.

CITIC also has existing exposure to the cosmetics industry. It agreed to buy Trilogy International, a producer of skincare products and fragrances listed in New Zealand and Australia, in late 2017 and followed up with the acquisition of Axilone, a Europe-headquartered packaging supplier to the cosmetics industry. The latter situation saw CITIC conduct separate negotiations with Axilone and its joint venture partner in order to create a single corporate entity.

The private equity firm is currently raising its latest US dollar-denominated fund, which launched with an overall target of $2 billion. A first close of $1.3 billion came last September. As of December 2018, the fund had accumulated $1.9 billion in commitments.

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• Topics
• Greater China
• Buyouts
• Consumer
• China
• CITIC Capital