Fancl Asia put on sale with US$1b price tag

The owner of skin care brand Fancl in Asia ex-Japan has hired Morgan Stanley to initiate a sale, targeting strategic and private equity investors for a deal that could fetch US$1 billion (HK$7.8 billion).

Hong Kong-based Chris Chan is the sole distributor of Fancl Corp's brand in Asia outside its home market of Japan, operating over 200 stores in Greater China and Southeast Asia via his company CMC Holdings.

The sale, which has not been mentioned before, comes as the retail sector grapples with global shifts in consumer spending brought about by the Covid-19 pandemic.

China, which accounts for around 80 percent of FANCL Asia revenue, has seen locked-down stores reopen since the second quarter of the year. But retail sales are recovering slower than market expectations.

Still, Asia accounts for 53 percent of global skin care sales, Euromonitor data shows, and researchers generally expect annual growth of over 5 percent in the next five years.

Fancl Asia is likely to run a two-round auction, according to one source, with first-round bids expected by the end of September. But Chan, CMC and Morgan Stanley declined to comment on plans.

Fancl Corp is not involved in the sale, so distribution contracts will not be affected by the Asia ownership change.

And Fancl Corp, known for its preservative-free cosmetics and supplements, declined to comment on any sale. A spokesman said the company could not confirm details of its agreement with CMC, citing confidentiality requirements.

Fancl Asia reported US$60 million to US$70 million in earnings before interest, taxes, depreciation, and amortization in 2018 and 2019, and projects a similar performance for this year. With annual revenue of US$250 million to US$300 million and profit margin as much as over 20 percent, a sale is likely to fetch a multiple of more than 10 times EBITDA.