THG to acquire US-based Dermstore.com from Target in $350m deal

THG Holdings

THG Holdings has agreed to acquire the US number one pure-play online retailer of prestige skincare and specialty beauty brands, Dermstore.com, from retail group Target in a $350m cash deal.

The deal represents a circa 1.8x 12 months’ forward revenue multiple and is subject to regulatory approval in the US. 

Dermstore was founded in 1999 to provide online access to professional grade skincare in the US and it adds to THG’s already strong online beauty businesses which include Lookfantastic.com and subscription box service Glossybox.

In addition to the Dermstore.com deal, the Manchester-based group which specialises in using its technology platform to take beauty, fashion and wellness brands direct to consumer, has also acquired two of its long-standing UK-based nutrition product suppliers, Claremont Ingredients and David Berryman for a combined purchase price of £59.5m payable in cash.

Claremont is the UK’s leading independent flavour manufacturing and development laboratory for sports nutrition and beverages. Berryman’s is recognised as one of the UK’s foremost fruit-based ingredients specialists, with significant canning and bottling capabilities. They join THG’s existing wellness and nutrition brand portfolio, which includes Myprotein, Myvegan, Myvitamins, Exante and Command. 

Antitrust clearance is expected to be received for the Dermstore.com deal in late January 2021. The business is therefore expected to contribute for 11 months of THG’s 2021 financial year, adding sales of circa $180m (£135m) and adjusted EBITDA of circa $4m (£3m). The acquisitions of Claremont & Berryman’s are expected to add sales of circa £15m and adjusted EBITDA of circa £4m in FY 2021.

The deals come shortly after THG was launched onto the London Stock Exchange with an initial valuation of £4.5bn, in what was one of the biggest listings of a UK firm since 2013. The group has been highly acquisitive and shortly after its float it announced it had acquired US-based luxury skincare brand Perricone MD in a $60m cash deal.

Commenting on the deals, THG’s chairman and CEO Matthew Moulding said: “A key driver behind the decision to list THG on the London Stock Exchange just over three months ago was to enable the Group to make major global investments, such as Dermstore.com. Accessing capital through a London listing has enabled us to accelerate our growth plans and build out a global leadership position within the exciting beauty industry. We are delighted to welcome Dermstore.com into our growing portfolio of online beauty assets. 

“We are also pleased to announce the acquisitions of Claremont and Berryman’s. These two businesses are highly complementary, with Berryman’s accelerating our capabilities in drinks range development for the individual brands within THG Nutrition. Claremont will play a key role in developing flavours tailored to local tastes across the globe. Together these acquisitions will enable THG to significantly accelerate the launch of further product innovation to global markets, while increasing the proportion of THG Nutrition products wholly manufactured in-house.” 

THG Holdings has five business divisions including: THG Ingenuity, which powers DTC websites for a range of fashion, beauty and lifestyle brands; THG Beauty, which owns eight beauty brands including Lookfantastic.com, Glossybox and Espa; THG Nutrition which includes the Myprotein range of brands; THG Lifestyle which includes fashion retailer Coggles; and THG Experience which owns the Hale Country Club & Spa and Eclectic Hotel Group.

The group operates in 169 countries selling more than 1,000 brands through its 200-plus sites. It is based in Manchester and employs 8,000 people.