CVC picks up cosmetics retailer in €2.8bn deal

Owners Advent and the Kreke family were initially exploring an IPO for German retailer Douglas

CVC Capital Partners has agreed to acquire a majority stake in German perfume and cosmetics retailer Douglas from Advent International, according to a statement from Advent.

The firm will invest in the retailer alongside current co-owners the Kreke family, which will retain a 15 percent stake in the business.

Financial details of the transaction were not disclosed, but a source familiar with the matter indicated that the deal values the beauty retailer at around €2.8 billion.

Advent, CVC and the Kreke family declined to comment on financial details.

“As you know we had planned to go public over the course of the year, which would have been an interesting option, but only the second-best option for the company,” Henning Kreke, CEO of Douglas and a representative of the Kreke family, said during a conference call. “Following the offer made by CVC, Advent International and the Kreke family have jointly decided that the investment of CVC into Douglas is the best option for the company and its future development.”

Kreke added that this decision “accommodates my family’s desire to further develop the business in a private setting”.

Kreke will remain as CEO following the sale, CVC confirmed.

Advent and the Kreke family took Douglas private in December 2012 for around €1.5 billion. Advent invested in the business using capital from Advent Global Private Equity Funds VI and VII.

Douglas operates more than 1,700 stores across 19 countries, and in the financial year 2013/2014 posted pro forma sales of around €2.5 billion and an adjusted pro forma EBITDA of €256 million, according to Advent. Its product range consists of up to 35,000 products and related services in the fragrances, skincare, colour cosmetics and accessories segments.

Since the take-private, Douglas has developed its multi-channel business with an “integrated in-store, online and mobile offering” as well as implementing measures to boost productivity and efficiency. Last year Douglas bought French beauty retailer Nocibé, and has been substantially increasing its international presence, moving from a predominantly German business to a pan-European retailer.

“Many of the steps we have taken would not have been possible as a listed company, or they would have taken a lot longer,” Kreke said.

CVC partner Søren Vestergaard confirmed that CVC had capital available to support add-on acquisitions, if necessary, although a specific sum has not been allocated for this.

“Our focus going forward will be very much about putting the customer in the centre and building customer experience in the stores,” Vestergaard said, adding that there would be a focus on store development, product assortment, and growing the online business.

CVC’s latest flagship fund, CVC European Equity Partners VI, closed on its €10.5 billion hard-cap in June 2013.