Haleon plc entered into a binding agreement to sell the ChapStick brand to Suave Brands Company, a portfolio company of Yellow Wood Partners.
ChapStick invented the lip care category in the 1880s by launching a now-iconic lip balm that made ChapStick a household name. And for more than a century, ChapStick has added products to its portfolio with innovative new ingredients, skincare benefits, and flavors. Today, ChapStick is the leader in lip care and synonymous with the product category – it is the #1 brand by volume and has over 80% brand awareness.
Suave is a personal care brand that sells products across the hair, body, skin, and antiperspirant deodorant segments. And Suave was one of the first brands in the 1930s to bring salon-quality hair care to the general public at an accessible price. The Suave brand also sells products for women, men, and kids across mass retailers, grocery stores, drug retailers, and e-commerce platforms and today is found in one out of every two U.S. households.
Under the terms of the deal, Haleon will receive pre-tax cash proceeds of about $430 million and a passive minority interest in the Suave Brands Company. When entering into the binding agreement, this interest was valued at about $80 million. The cash proceeds from the sale will be used to pay down debt, underpinning confidence to de-lever to net debt/Adjusted EBITDA of below 3x during 2024.
Yellow Wood’s portfolio of consumer brands also includes global foot care brands Dr. Scholl’s and Scholl International; Beacon Wellness Brands, led by its anchor brand PlusOne, the #1 sexual wellness device brand; beauty brands Real Techniques and EcoTools; skincare brand Byoma, and self-tanning brands Isle of Paradise, Tanologist and TanLuxe. In December, Yellow Wood announced the pending acquisition of the Elida Beauty portfolio of brands from Unilever. This platform includes leading brands such as Q-Tips, Caress, TiGi, Ponds, St. Ives, and Noxzema, and European brands including Brut, Impulse, Monsavon, and Timotei. This transaction is scheduled to be consummated in 2024.
ChapStick generated £112 million in revenue for the FY ended 31 December 2023. And the sale, subject to the satisfaction of customary closing conditions, is expected to close in the second quarter of 2024.
More details on the transaction and its impact will be provided in Haloeon’s FY 2023 results announcement on February 29.
KEY QUOTES:
“(This) announcement is consistent with Haleon being proactive in managing our portfolio, and being rigorous and disciplined where there are opportunities for divestment. While ChapStick is a great brand, much loved by consumers around the world, it is not a core focus for Haleon. Selling the brand allows us to simplify our business and pay down debt more quickly. We’re confident the brand will continue to thrive under its new ownership.”
— Brian McNamara, Chief Executive Officer, Haleon
“The Yellow Wood team established Suave Brands Company in May 2023 to acquire the Suave brand from Unilever. We saw the opportunity to grow Suave with a more focused management approach while also creating the corporate infrastructure to acquire and manage additional personal care brands across multiple categories to drive synergies across the platform. We are excited to add ChapStick, another leading brand with deep equity and history, into our platform. At Suave Brands Company, our management team is focused on building a platform of category leading brands that consumers love while working with our retail customers and manufacturing partners to grow the brands. We look forward to continuing to build Suave Brands Company by identifying additional personal care brands to add to the portfolio.”
— Suave Brands Company Chief Executive Officer Daniel Alter
“ChapStick is the #1 lip care brand in the mass, drug, food and convenience store channels. Chapstick products are purchased by one out of every five households in the United States; consumers love the brand. Chapstick has the highest brand awareness in lip care, as well as the strongest purchase conversion among all brands in the category. Similar to Suave, ChapStick will benefit from Suave Brands Company’s leadership, setting the brand up for continued innovation and growth driven by increased consumer marketing investments, as well as a more focused sales approach. We look forward to completing this transaction in the first half of 2024.”
— Dana Schmaltz, Partner at Yellow Wood Partners
“ChapStick will be Yellow Wood’s fifth corporate carveout transaction in the past four years. The firm prides itself on having become a trusted partner to CPG companies to carve brands out and set them up for their next stage of growth. We appreciate Haleon’s collaboration on all levels and look forward to working with them to complete the carveout expeditiously.”
— Tad Yanagi, Partner at Yellow Wood Partners
