Goldman Sachs, Bain to Buy Majority Stake in Korean Cosmetics Firm

Goldman Sachs Group and Bain Capital Private Equity will acquire a majority stake in unlisted cosmetics maker Carver Korea Co Ltd, seeking to tap into the growing popularity of South Korean beauty products in markets such as China. The companies released a joint statement that Carver Korea founder and Chairman Lee Sang-rok, who previously held a 60.2 percent stake in the firm at end-2015, will retain a minority stake and "participate in day-to-day management.”

Details, including the price and specific stakes the foreign buyers are getting, were not disclosed. But a person familiar with the matter told Reuters that Goldman and Bain together are paying more than 350 billion won ($307.45 million) to get majority ownership of Carver.

The acquisition comes as the so-called Korean Wave of culture exports, from soap operas and K-pop music to food and fashion, boost overseas demand for beauty products and follows other foreign investment into South Korean cosmetics firms, such as Estee Lauder Companies Inc acquiring a stake of unknown size in the parent firm of Korean skincare brand Dr.Jart+ in October 2015. Also last year, China's Jumei International Holding Ltd invested about $125 million in the "snail cream" maker Its Skin Co Ltd. while another China investor Lancy Group acquired 10 percent of unlisted "mask pack" maker L&P Cosmetics Co Ltd for $51 million, according to Its Skin and L&P Cosmetics officials. Officials at Jumei and Lancy could not be immediately reached for comment.

Most recently, L Capital, an investment company affiliated to the world’s largest luxury goods conglomerate LVMH Moet Hennessy Louis Vuitton, pledged $50 million (57.3 billion won) in South Korea’s homegrown cosmetics company CLIO Co. While this is the first time for luxury goods conglomerate to make an investment in a Korean cosmetics company, the company previously invested about 60 billion won in Korean production/management company, YG Entertainment Inc. 

South Korea's cosmetics output grew to 10.7 trillion won in 2015, up 20 percent from the previous year, while cosmetics exports grew 44 percent from the previous year to $2.59 billion in 2015 due to growing overseas popularity of "K-beauty" products, according to the country's Ministry of Food and Drug Safety.

Western luxury brands have certainly been looking East rather relentlessly as a hotbed for growth. The Chinese consumer, in particular, has become wealthier and more accepting of Western retail formats since luxury brands began investing in the Chinese market, with Louis Vuitton, Bally, Gucci and Ferragamo among the first wave of retailers to open outlets in China more than 10 years ago. 

Changes are coming in terms of the countries being targeted (think: less expansion in China and more of a focus on South Korea, for instance, as many Chinese are now buying their luxury products there and by 2020, Chinese luxury consumers will spend $29 billion at South Korea luxury retailers).