NEW YORK, United States — A group led by private equity firm EQT Partners is poised to enter exclusive talks for Nestle SA’s skincare business, as a hotly contested sale process for the consumer giant’s moisturizers, acne treatments and wrinkle fillers comes to a close, people familiar with the matter said.
The deal with the EQT-led consortium -- which also includes Abu Dhabi Investment Authority and Canada’s Public Sector Pension Investment Board -- could still fall through, and no final decisions have been made, the people said, asking not to be identified because the discussions are private. Representatives for Nestle, EQT, ADIA and PSP declined to comment. The Financial Times reported on the status of the talks with EQT earlier.
The unit could fetch as much as $10 billion in the sale, people familiar with the matter said previously. At that price, it’s set to be the largest for a European business so far this year, according to data compiled by Bloomberg.
Nestle, the world’s largest food company, has been focusing on products such as coffee, water and pet food as it works to spur sales and revamp growth. While the Swiss company’s executives have said the skin-health business is largely outside of the company’s core, the unit attracted interest from at least a dozen potential bidders during the auction, people familiar with the matter had said previously.
The deal would come as EQT, the Nordic region’s biggest private equity firm, explores a potential initial public offering. EQT has raised more than 60 billion euros since it was started about 25 years ago. Investor AB, founded by the wealthy Wallenberg family, is the firm’s anchor investor with an ownership of about 10% in its most recent funds, according to the company’s website.
The assets had attracted private equity and sovereign wealth fund bidders as well as interest from companies focused on consumer health products. Colgate-Palmolive Co. and Unilever NV had made offers for the consumer arm, which includes over-the-counter products such as Cetaphil and Proactiv, while PAI Partners and Baring Private Equity made a joint bid for the medical treatments business known as Galderma, people familiar with the process had said.
Bidders for the entire business included a consortium made up of EQT Partners, Abu Dhabi Investment Authority and Canada’s Public Sector Pension Investment Board, as well as an individual offer from KKR & Co., the people had said. A group that included Advent International, Cinven and Singapore’s GIC Pte. were also interested in the entire unit, people familiar with the matter said previously.
The skincare business was built out of a joint venture that Nestle formed with L’Oreal SA in 1981. Nestle paid the French cosmetics maker more than $3 billion to buy the business out in 2014 and in the following months paid a further $1.4 billion to acquire a portfolio of skin-care drugs from Valeant Pharmaceuticals.
Selling dermatological brands would dismantle a business that Chief Executive Officer Mark Schneider’s predecessor, Chairman Paul Bulcke, touted as a promising new avenue of growth when he led the company. Another piece of Bulcke’s legacy was undone with last week’s announcement that Nestle would halt direct store delivery of frozen pizza and ice cream in the U.S.
The skincare unit has been a weak spot, with activist investor Dan Loeb at hedge fund Third Point saying Nestle’s foray into dermatology seemed unrelated to its core business and should be unwound.
Nestle has not said what it would do with the cash from a sale. The company said earlier this year that it’s accelerating a program to buy back 20 billion Swiss francs ($20 billion) worth of shares to complete it six months early. Schneider had told reporters at the time that the company isn’t excluding further deals.
By Dinesh Nair, Sarah Syed, Liana Baker; Editors: Eric Pfanner, Dinesh Nair, John Lauerman, Amy Thomson