May 18, 2010
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Estee Lauder to buy Smashbox makeup brand

May 18, 2010

By Alexandria Sage

SAN FRANCISCO, May 17 (Reuters) - Estee Lauder Companies Inc (EL.N) said on Monday 17 May that it would buy Los Angeles-based Smashbox Beauty Cosmetics Inc to expand the prestige brand at home and internationally, but did not disclose terms.

Estée Lauder
Estée Lauder

Estee Lauder said the deal, which is expected to close in July subject to regulatory approval, will add to earnings in fiscal 2011, before transaction and integration costs.

Smashbox, which sells its cosmetics mainly in North America, was founded in 1996 by two great-grandsons of Max Factor. The brand was inspired by the needs of makeup artists working on photo shoots.

Estee Lauder Chief Executive Fabrizio Freda said Smashbox already is a well-known brand in specialty channels such as Sephora LVMH (LVMH.PA), and on the Internet.

Moreover, the brand was one of the first to embrace digital and social media. Its website features instructional videos on how to achieve popular makeup looks.

Besides attracting younger, hipper customers, the addition of Smashbox could lure away consumers shopping bigger brands, Freda said.

"It has a lot of capability to attract from the mass competitors," he said.

The brand is already strong in the United States, Canada, United Kingdom and Taiwan, Freda said.

Smashbox's closest competitor is MAC, which is also owned by Estee Lauder, executives said, adding that Smashbox could see a similar growth trajectory under its ownership.

MAC had sales of about $100 million in 1998, when Estee Lauder took full ownership, but it has grown to an over $1 billion business, said Estee Lauder Group President John Demsey.

"It's one of the fastest-growing brands in the industry," Freda said of MAC. "We are very good at ... making them over time into winning global brands."

Other brands in the Estee Lauder portfolio include Clinique, Origins, Bumble and bumble, Jo Malone and Prescriptives. (Reporting by Alexandria Sage; Editing by Derek Caney and Richard Chang)

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