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with its hand creams priced at 100 yuan, the french brand l'occitane has occupied major high-end shopping malls in china, and its bright yellow stores have become a classic symbol. it came from the fragrance of provence, france, and now it has even reached the hands of china's "county ladies".

while l'occitane was strengthening its penetration in the chinese market, it chose to withdraw from the hong kong stock market, where it had been listed for 14 years. at 9:00 a.m. on september 13, l'occitane officially stopped trading its shares until all its shares were delisted. thus, l'occitane's tortuous privatization process finally came to an end.

since its listing in 2010, l'occitane's revenue has more than tripled from 612 million euros to 2.542 billion euros, and it has gradually built a multi-brand beauty group. however, in the face of a severe and highly competitive external environment, l'occitane chose to delist, no longer be disturbed by short-term market sentiment, and achieve focused and flexible investment.

although l’occitane’s capital chapter has come to an end, the market battle continues.

blackstone and goldman sachs "back up"

spending over hk$14 billion on privatization

in 1976, l'occitane was founded in provence, france, the "home of lavender". founder olivier baussan bought a distiller to extract rosemary essential oil and sold it in the local market. in 1994, l'occitane launched shea butter hand cream, which has become one of the best-selling classic products in the past 30 years. in 1995, l'occitane entered the hong kong market, and ten years later in 2005, it entered mainland china.

in may 2010, l'occitane was listed on the hong kong stock exchange, becoming the first french company to sell shares in hong kong, china. at that time, l'occitane's initial public offering price was hk$15.08 per share, and its market value on the first day of listing exceeded hk$20 billion.

in the 14 years since its listing, l'occitane's share price fell below hk$10 per share in march 2020, with a market value as low as hk$14 billion; excluding the share price increase caused by privatization this year, l'occitane's share price reached its highest point in early 2022, exceeding hk$33 per share, and its market value once approached hk$50 billion.

image source: daily economic news data map

however, l'occitane has not been able to play the role of refinancing in the capital market. there has been no record of additional issuance since its listing, and the stock liquidity has been poor in recent years. the relatively static market performance and the complex and severe macroeconomic environment have also led various capitals to consider privatizing l'occitane.

however, this process has been full of twists and turns. as early as 2018, there were rumors that l'occitane had attracted acquisition interest from a number of private equity funds, but the news soon fell through.

in july 2023, the market heard that l'occitane was going to "withdraw from hong kong and turn to europe". at that time, l'occitane issued a statement to deny it, but still left some "room", saying that "the controlling shareholder has reviewed options regarding its interests in the company from time to time, including the possibility of purchasing, selling, privatizing or other equity restructuring options for the company's securities, but has not yet determined a clear plan."

so, in august of that year, l'occitane finally admitted that it expected the controlling shareholder to make a conditional voluntary general offer, with the potential selling price being no less than hk$26 per share. but this plan failed a month later.

it was not until april 2024 that privatization returned. l'occitane announced that its controlling shareholder, l'occitane groupe sa, proposed to acquire all the shares of the company that it did not currently hold, planned to privatize the company and delist the company's shares from the stock exchange, and proposed a cash offer price of hk$34 per share.

the funds needed for this privatization acquisition include hk$13.907 billion for the share offer and hk$147 million for liquidity arrangements. l'occitane said that the controlling shareholder's acquisition funds mainly come from external debt financing and shareholder loans, the latter of which is funded by payment-in-kind loan bill financing provided by multiple parties, including the world-renowned private equity firm blackstone group and goldman sachs.

the reporter of daily economic news noted that the acquisition offer price of hk$34 per share proposed by the controlling shareholder this time can be said to be "full of sincerity". it is not only much higher than the last offer price of hk$26 per share, but also significantly higher than the historical share price of l'occitane. this is a good opportunity for small and medium shareholders to realize a premium exit.

the announcement shows that the offer price is equivalent to a premium of approximately 30.77% to the closing price of hk$26.00 per share reported on the stock exchange on the undisturbed day, and is equivalent to a premium of approximately 49.91% and 60.83% to the average closing prices of approximately hk$22.68 per share and hk$21.14 per share of the shares for the 30 and 60 trading days ending on (including) the undisturbed day, respectively.

from the official disclosure of the privatization plan at the end of april to the suspension of share trading, l'occitane's share price has risen by more than 14%, which also proves the market's welcome and optimism about privatization.

listing as a “heavy investment” in asia

delisting to enhance investment flexibility

why did a european company founded in france and registered in luxembourg choose hong kong, china as its listing location? why did it choose to delist now? this is related to the strategies of l'occitane at different historical stages.

at the beginning of its listing, l'occitane was heavily invested in asia. according to its prospectus disclosed in 2010, as of the end of february 2010, it had 270 stores in the asia-pacific region, which was the region with the largest number of stores. during the same period, there were 232 stores in the americas and 251 stores in europe. at that time, japan was the largest market in l'occitane's asia-pacific business, and china was a market with strong growth potential. the prospectus also predicted that the growth rate of the chinese market would lead the major global markets.

on the other hand, l'occitane also has insight into the widespread skin care demand in the asia-pacific region. it stated in its prospectus: "consumers in the asia-pacific region generally believe that fair skin is beautiful... consumers in the asia-pacific region are a group that pays more attention to skin care, and skin care products are the largest product segment in the asia-pacific region."

therefore, in order to deepen its presence in the asia-pacific skincare market, hong kong, china, as the financial center of asia, became the preferred listing location for l'occitane. fashion industry analyst tang xiaotang told reporters: "the listing was also a marketing method for l'occitane to increase its exposure in the asian market at that time."

however, in recent years, the position of the asia-pacific region in l'occitane's global market has gradually declined. in fiscal years 2023 and 2024, the revenue share of the asia-pacific region was 42% and 34.8% respectively, a decline of nearly 7 percentage points. at the same time, the americas market surpassed asia-pacific to become l'occitane's largest market. the growth potential of the americas market is also strong. in fiscal year 2024, the sales of this market increased by 63% year-on-year at a fixed exchange rate, becoming the fastest growing region, while the asia-pacific market only increased by 6.3% year-on-year during the same period.

on the other hand, l'occitane has been expanding its multi-brand business in recent years and has made several acquisitions. in 2019, it acquired the british high-end skincare brand elemis; in 2021, it acquired the north american high-end body care brand sol de janeiro; in 2022, it acquired the australian skincare brand grown alchemist (sold in april 2024); and in 2024, it acquired the italian luxury home fragrance brand dr. vranjes firenze.

image source: screenshot of l’occitane’s official weibo

today, l'occitane has a total of eight brands. in fiscal 2024, the sales share of the main brand "l'occitane" dropped from 66% to 55%, and the acquired brands elemis and sol de janeiro have accounted for a total of 37% of the market share, of which sol de janeiro grew rapidly by 167% in that fiscal year.

image source: financial report screenshot

today, the american market has become a "strategic stronghold" for l'occitane, and a multi-brand strategy requires large-scale investment. l'occitane's listing status on the hong kong stock market may restrict the company's hands, which may be one of the reasons why the company started the privatization process.

the reporter of daily economic news learned from l'occitane that the main reason for the delisting was the industry development trend and the operating pressure faced by the listed company. "in order to maintain and expand the market share of each of our brands in an increasingly competitive environment, it is necessary to further increase investment in marketing, store renovation, information technology infrastructure and attracting talents," the company said.

l'occitane added: "this offer gives the company greater flexibility to make strategic investments and implement its strategies efficiently as a privately operated company, without having to bear the expectations of the capital markets, regulatory costs and disclosure obligations, the pressure of share price fluctuations and short-term market sensitivities and investor sentiment."

tang xiaotang believes: "l'occitane is currently in the stage of investment and expansion. if it wants to become a beauty group, capital investment such as acquisitions may lead to poor short-term performance, which is not conducive to shareholder returns. in order to develop better at this stage, the company chose to delist." he believes that privatization will have little impact on l'occitane. on the contrary, it may help eliminate adverse factors such as stock price fluctuations, thereby promoting better development of the company.

targeting china's "county ladies"

high marketing has not yet brought high returns

l'occitane enjoys a high reputation in the chinese market. compared with the hand creams that are generally priced at tens of yuan on the market, l'occitane has become the representative of high-end hand creams with a unit price of hundreds of yuan and the positioning of natural raw materials. it is known as the "hermes of hand creams". in addition to hand creams, bath oils, scrubs, etc. have also become l'occitane's star products.

in 2014, l'occitane opened its first offline store in china, officially entering tmall, after 9 years of opening a store there. in 2017, l'occitane signed a contract with popular idol lu han. these intensive actions have enabled l'occitane to achieve rapid growth in the chinese market, with sales in china rising from 100 million euros to more than 300 million euros in ten years. in fiscal 2021, the chinese market became l'occitane's largest single market for the first time, and in the latest fiscal year, the chinese market ranked second.

image source: l'occitane official weibo

the reporter of daily economic news found that l'occitane's "highlight moment" in china has passed, and it is facing growth difficulties. from fiscal year 2022 to fiscal year 2024, l'occitane's revenue in the chinese market was 328 million euros, 298 million euros, and 327 million euros, respectively. among them, fiscal year 2023 was the first decline in nearly a decade. in fiscal year 2024, it barely recovered to the level of fiscal year 2022 through a series of marketing and investment methods.

these marketing resources are invested more in the sinking market in offline channels, and in emerging e-commerce channels such as douyin in online channels.

if after more than a decade of development, l'occitane has become saturated in high-tier cities and its brand appeal is no longer there, then china's "county ladies" with more stable consumption power may be its new opportunity. in a conference call for the 2024 fiscal year report, l'occitane executives said: "the group will open 10 to 15 new stores in china's third- and fourth-tier cities." the reporter checked the company's official website and found that l'occitane's counter layout in china already includes low-tier cities such as ma'anshan, anhui, yichang, hubei, and luoyang, henan.

tang xiaotang told reporters that although the growth of beauty products in lower-tier cities is better than that in first- and second-tier cities, the absolute scale is still relatively small. in addition, the e-commerce penetration rate of china's beauty industry has exceeded 50%, and the reach efficiency of offline stores may not be high. there may not be many high-end department stores that match the brand tone in the lower-tier markets, and cost is also a factor that needs to be considered.

on the other hand, in terms of online channels in china, l'occitane stated in its 2024 annual report: "except for the united states, japan and travel retail channels, the largest part of our marketing expenditure is invested in the chinese market of the traditional brand 'l'occitane'. driven by strategic social media and digital marketing activities, sales have increased by double digits, including the launch of the brand's online mall channel on douyin."

as for new brands, high-end skincare brand elemis only entered the chinese market in 2020 after being acquired by l'occitane. e-commerce platforms show that the price of the brand's products ranges from 500 yuan to 2,000 yuan. at present, this brand is not as well-known in china as other imported brands that entered the market earlier. l'occitane stated in its financial report that in fiscal year 2024, it will accelerate investment in elemis' social media channel marketing in china, highlighting the brand's global best-selling products such as collagen cleansing cream. kol (opinion leader) live broadcasts on douyin have supported the brand's sales growth, and it will continue to explore marketing and business development opportunities on xiaohongshu.

this also means that l'occitane's sales in the chinese market will resume growth in fiscal 2024, mainly driven by "big-budget" marketing, but the conversion into profits has not yet appeared.

the financial report shows that in fiscal year 2024, l'occitane's overall marketing expenses increased by 57.3%, one of the reasons being increased investment in traditional and social media marketing. in addition, the reported operating profit margin calculated based on net sales fell by 2.0 percentage points to 9.2%, of which 4 percentage points were due to increased marketing investment to maintain brand development. the full-year net profit attributable to the parent company fell from 115 million euros in the previous fiscal year to 93.9 million euros.

however, l'occitane, which has already been delisted from the capital market, no longer needs to explain to investors the necessity and rate of return of large-scale marketing. faced with the downturn in high-end beauty products, intensified competition, and cautious demand in an economically volatile environment, how effective l'occitane's "playing style" will be will only be seen in the future.