Kanebo latest: L'Oreal pulls out of bidding

By Jess Halliday

- Last updated on GMT

Related tags: Cosmetics division, Morgan stanley, L'oréal

L'Oreal has pulled out of the bidding for beleaguered Japanese
household and cosmetics group Kanebo, citing a lack of Synergy with
its existing brands.

The French beauty giant announced today that that it declined to enter the second stage of bidding, which took place yesterday - a decision that will come as a surprise to many industry commentators who had identified it as a strong candidate.

"After looking at the Kanebo case L'Oreal did not identify enough synergies between L'Oreal and Kanebo's business, and decided not to make an offer,"​ a L'Oreal spokesperson told CosmeticsDesign.com.

Around ten groups are believed to have made offers, including Japan's Kao Corp and Kose Corp, but excluding Shiseido, which pulled out on August 11 due to a lack of cost savings. L'Oreal was initially reported to have placed a bid through Morgan Stanley.

Kao put up a serious offer for Kanebo's cosmetics division last year, but the bid was scuppered at the last minute when the Industrial Revitalisation Corp of Japan (IRCJ), the state-backed body that helps companies in financial difficulty to get back on their feet, stepped in to help pull Kabebo out of spiraling debt. The company has since admitted to inflating its profits to the tune of $2.4 billion over a five-year period that ended in March 2003.

The next phase in the process will be to narrow the number of bids to three - and that is expected to take place as early as October. The IRCJ expects that the final decision will be made after another round of bidding before the year is out.

Until that happens, it is keeping the details of the process closely under wraps.

The IRCJ has valued Kanebo at around 400 billion yen ($3.5 billion), the price offered by Kao for the cosmetics division last year. But press reports have speculated that the minimum purchase price for Kanebo will be higher, around 430 billion yen ($3.80 billion).

Most of the interest has centered on Kanebo's profitable cosmetics division, and analysts believe there is a strong possibility the household business operations will be sold off after the company has been bought.

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