Deal focus: Permira consolidates ingredients of JMO success story

The genesis of Permira's acquisition of US personal care brand John Masters Organics (JMO) and its exclusive distributor in East Asia was a separate M&A transaction that took place three years ago. Yoshimune Noda and Maiko Noda took JMO into Japan in 2007 and had made the brand bigger there than in its home market. They sold the distribution business, Styla, to local GP Rising Japan Equity (RJE) and bought a 65% interest in JMO itself, with founder John Masters retaining a minority stake.

However, separating the brand from the distributor proved problematic, particularly when RJE was discussing a potential exit with several domestic personal care companies. "Brand owners often work with distributors in individual markets, but when a market accounts for a big chunk of your sales you want to control that as part of the brand," says Alex Emery, partner and head of Asia at Permira. "We always felt it would be best to combine those two entities and integrate them as one."

A sale process was initiated a year ago but it failed to go through, which may have been due in part to the complexity of the transaction. In order to become majority owner of the combined entity, an investor would have to reach agreements with separate vendors driven by different motivations. While RJE wanted a cash exit, the Nodas wanted a partner to support expansion into new markets.

Permira prevailed in a new process that ended last week. The private equity firm is buying a controlling stake in JMO and Styla for an enterprise valuation of JPY37 billion ($336 million). The Nodas are rolling their 65% holding in JMO into the combined entity, leaving them with an approximately 40% stake. Permira will own most of the rest, with John Masters' interest reduced to single digits, although he has agreed to remain involved in the company.

JMO distributes its organic personal care products in 40 countries. The revenue split between Japan and the rest of the world is about 50-50, and Emery attributes the brand's success in the country to a strong retail concept: customers are encouraged to try out the products in the store. This combination of customer experience and premium organic ingredients appears to resonate with Japanese consumers. "It's like buying organic food; once you decide you want to buy it you stick to it," says Emery.

JMO started out as a hair care specialist and has since expanded into skincare and body care. Permira plans on helping the company add to its product range in order to stay competitive in Japan with the likes of Aveda and L'Occitane. However, much of the growth is expected to come from other markets in East Asia. Emery expects the development trajectory to be similar to that of L'Occitane, which once relied upon Japan as its single biggest market but then saw this share drop on becoming more global.

"As successful as they have been in Japan they have found it harder to take the brand into new markets," he adds. "We want to help assemble the right teams in other Asian markets, and in Europe, so the rest of the world can grow as well."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• North America
• Consumer
• Buyouts
• Japan
• USA
• Permira Advisers