Milk Makeup Owner Waldencast Goes Public

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Becoming a public company as speculation mounts that the U.S. is in danger of tipping into a recession may be a daunting prospect to some, but not to former L’Oréal executives Michel Brousset and Hind Sebti.

Alongside Felipe Dutra, they founded Waldencast Acquisition Corp., a special purpose acquisition company (often referred to as a SPAC), whose prize assets are Milk Makeup and Obagi Skin Care. SPACs act as a shell company that investors pour money into via an initial public offering and those funds are then used to acquire a company that will inherit its stock exchange listing minus the traditional time-consuming IPO process.

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With the deal to go public approved by shareholders earlier this week, Waldencast Acquisition Corp. will officially join Nasdaq on Thursday as Waldencast plc.

“The great thing about beauty is the resilience of beauty to recession,” said Brousset, a former president of L’Oréal’s consumer product division for North America of its stock market debut at a time of economic uncertainty. “Whether it’s the lipstick effect or whatever the explanation is, if you take a long-term view of beauty, it is a business that is quite resilient to recessions and certainly we are seeing that in the marketplace.”

He also appeared to be equally relaxed about the fact that the SPAC market, red hot in 2021, has cooled significantly as investor interest wanes and policymakers mull increasing regulation surrounding the category. “SPAC is just a tool used. We are confident in the strategy and objectives in this business to create over time a global best-in-class beauty and wellness company,” he added.

Waldencast Acquisition Corp., which is related to private equity firm Waldencast, acquired Milk, whose founders include Mazdack Rassi and Zanna Roberts Rassi, and Obagi last year in a deal with a combined value of $1.2 billion.

Sebti, who has taken on the role of chief growth officer, said the attraction was the fact that they are “high growth” businesses and have a “proven” strong connection with their consumers in each market. “They also have interplay in complementary markets — one is skin care, one is makeup, one is more in Sephora retail, one is more dermatologists and one of our thesis or visions at Waldencast is to have a platform that is balanced,” she added.

Regulatory filings showed that Milk’s net revenue was around $47 million in 2021, up from $40 million in 2020, and Waldencast is forecasting it is likely to come in at around $66 million this year. The hope for 2023 is that net sales will top $100 million.

“It’s building on a very strong performance on two most recent launches — Rise mascara and Pore Eclipse,” Brousset said of what’s driving sales. “With Pore Eclipse what’s interesting is we now not only have the number-one primer at Sephora, which is Hydro Grip, we now also have number two, so very strong performance in that category.

“That’s part of the performance in the U.S. In addition, we’re just at the beginning of internationalization of the brand. So a lot of international business is starting to build.”

Milk cofounders Roberts Rassi, Rassi, Dianna Ruth and Georgie Greville are all still involved in the business, with Sebti stating that one of the promises of Waldencrest Acquisition’s propositions is to be the home of indie brands that keep the founders involved. “What makes these brands magical to start with, you don’t have to have hard separation, you can still be there and it’s just about knowing somebody who can help you scale well and we’re keeping that metric so I’m very excited about that,” she said.

Obagi, meanwhile, closed 2021 with net sales of $179 million, up from $90 million, and is expected to finish 2022 with about $190 million in sales. For 2023, they are forecast to come in at around $213 million. Adjusted EBITDA was $44 million in 2021, up from $7 million the prior year. That is expected to rise to $50 million this year.

As for their next acquisition, Brousset believes it’s too soon to think about timing. “The first task is to make sure that these brands are competing on a fantastic trajectory, outperforming our projections today. So we need to continue to make sure that they are performing that way. I think it will depend on how the shares will trade because the share is our currency. But we have a number of targets pre-identified as an interesting additions to the portfolio.”

Details will become more clear when shares begin trading Thursday.

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