Baring Asia to exit Magic Holdings as L’Oreal makes $843m takeover bid

Baring Private Equity Asia is on course to exit Chinese cosmetic facial masks specialist Magic Holdings International after L’Oreal offered to buy the company in a deal worth $843 million. The PE player stands to receive $176 million, having invested just under $80 million in the Hong Kong-listed company.

According to a regulatory filing, L’Oreal is willing to pay HK$6.30 for all outstanding shares, a 24.8% premium to the last closing price. Baring, Greenwoods Asset Management, Atlantis Capital and Magic’s founders – between them representing 62.3% of the company equity – have agreed to support L’Oreal’s proposal.

A full shareholder vote, in which 75% of shares are cast in favor of the bid, is required for the deal to go through. Various regulatory approvals must also be granted. If successful, L’Oreal will retain She-Yu Yuan, Magic’s co-founder, to serve as CEO of the new business.

Baring acquired a 15% interest in Magic Holdings in January 2012 for HK$451 million ($58.1 million) from Queenherb Enterprises, a wholly-owned subsidiary of Hua Han Bio-Pharmaceutical Holdings. Six months later, it bought another 50 million shares from the same seller for HK$146 million.

In February, the PE firm increased its holding to 21.03%, although the most recent filing puts it at 20.94%. Baring is Magic’s largest single shareholder.

Magic Holdings sells facial mask products in China under its MG brand, which is responsible for 170 products across 13 series. With 261 distributors and 10,184 points of sale, the company claims to have the largest market share in the facial mask industry in the country.

EBTIDA for 2012 came to HK$272.2 million, up 27% year-on-year, while revenue jumped 41% to HK$1.35 billion.

“Facial masks are one of China’s beauty market’s fastest growing areas with very promising development prospects. Magic’s MG brand is one of China’s leading brands in this category,” L’Oreal said in a statement.