Skincare brand iKOU acquired by Adore Beauty for $25m
Online beauty retailer Adore Beauty has purchased iKOU, a wellness and skincare brand, for $25 million. This acquisition aims to strengthen Adore Beauty's private label business.
Transaction snapshot
Deal value: $25 million ($20 million upfront, $5 million after 18 months)
Deal multiples: 12.5x EBITDA (based on iKOU's forecast $2 million EBITDA for FY24)
Deal type: All-cash acquisition
Investors: Adore Beauty
Adore Beauty described the purchase as an "ideal strategic fit". iKOU, founded 17 years ago in the Blue Mountains by Naomi and Paul Whitfeld, offers over 300 SKUs across organic skincare, bath and body, home fragrance, herbal tea, and lifestyle accessories.
Tamalin Morton, Adore's outgoing CEO, said, "iKOU complements our existing business, delivering revenue growth and margin expansion, while supporting private label and physical store initiatives."
iKOU's extensive product range is expected to accelerate private label revenue share, improve margins, and provide Adore Beauty with its first physical store presence across three premium locations in NSW.
iKOU is forecasted to generate $8.1 million in revenue and $2 million in EBITDA in FY24. The brand operates stores in the Blue Mountains, Sydney's QVB, and Byron Bay, along with an online shop and wholesale agreements with spas and retailers, including partnerships with Park Hyatt Sydney, The Langham, and EOS Skycity.
Adore Beauty's shares fell 2.7% to 92¢ following the announcement. As of 1 July 2024, the stock was trading at 81¢, down 8.47%.
The acquisition represents about three-quarters of Adore Beauty's $32.3 million cash position and roughly 28% of its $88 million market capitalisation.
Adore Beauty is currently searching for a new CEO, as Morton plans to leave later this year for personal reasons. She joined in November 2022 to stabilise the business and will transition to a consulting role.
Adore Beauty went public three years ago at $6.75 per share. However, its market value has dropped due to higher costs and lower margins. Last year, the company reported a $600,000 loss on revenues of $180.6 million. For Q3 FY24, revenue was up 8.9% year-on-year to $45 million, with 514,000 returning customers.
Founders Kate Morris and James Height stepped down from executive roles last year but remain on the board, each controlling 11.05% of Adore's shares. Quadrant Private Equity holds a 32.51% stake, while New York-based Woodson Capital Management owns about 6.6%.
Adore Beauty expects to finalise the iKOU transaction by 31 July 2024, subject to certain conditions. The company aims for EBITDA margins between 2% and 4% this financial year, noting challenging retail conditions due to cost of living pressures and subdued customer sentiment.
