Japan's Shiseido to buy Bare Escentuals for $1.7 billion

Shiseido Co Ltd, Japan's largest cosmetics company, has agreed to buy U.S.-based Bare Escentuals for $1.7 billion, as it looks to speed up its expansion and break into a new part of the North American market. The California-based firm, which markets natural-looking cosmetics and runs 800 retail outlets in the United States, will operate as a separate division of Shiseido, and its brands will continue to be run by CEO Leslie Blodgett.

Shiseido has been focusing on growth in China to offset a $24 billion home market that is shrinking as Japan's population ages. The company said adding Bare Escentuals, a San Francisco-based cosmetics and skincare firm, would help it move into the fast-growing natural-ingredient cosmetics market.

"Bare had good opportunities for growth internationally, but the size that they are, they needed greater resources. Shiseido provided them so many greater resources... into Europe and into Asia," Jason Gere, an analyst with RBC Capital Markets, said. "It's just much more difficult for smaller companies to grow on their own when they want to grow internationally," he said. Gere added that it would have been difficult for Bare to grow earnings while they still continued to invest in advertising and other infrastructure. "For Bare, this, in many ways, provides them the same growth opportunity, with much easier way to achieving them."

"Shiseido is not a global player on natural-ingredient products, for which demand is growing," Shiseido President Shinzo Maeda told a news conference. "By capitalising on Bare Escentuals' strength in this area, we can expand our clientele." He said Shiseido can also capitalise on Bare Escentuals' TV and Internet-based marketing expertise. Cosmetics sales via these channels are growing in Japan, but Shiseido has been a small player.