Forma Brands, the parent company of Morphe, Morphe 2 and Lipstick Queen, is filing for Chapter 11 bankruptcy.
According to a statement from Forma, parent company FB Debt Financing Guarantor LLC “has entered into a definitive asset purchase agreement with an entity controlled by the agent under Forma Brands’ existing secured debt, Jefferies Finance LLC (together with Jefferies Finance LLC, funds managed by Cerberus Capital Management L.P. and FB Intermediate Holdings LLC, each in their capacities as secured lenders, the ‘Investor Group’), under which substantially all of Forma Brands’ assets will be acquired.”
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The statement added that Forma obtained roughly $33 million in debtor-in-position financing from those investors, pending court approval. As part of that sale, the company has entered Chapter 11 in a Delaware court.
The filing comes days after Forma announced Morphe brand store closures via Twitter, and confirms a WWD report in October that the business was mulling options, including bankruptcy and out-of-court settlements with creditors.
Private equity firm General Atlantic acquired a majority stake in the business in 2019, a deal that then valued Forma at $2.2 billion. At that point, net sales were said to have hit $500 million, due in part to buzzy partnerships with mega-influencers like Jeffree Star and James Charles.
General Atlantic did not immediately respond to WWD’s request for comment.
In 2021, sales were estimated to be closer to $350 million, as reported. For that year, NPD reported that so-called “Insta-brands,” which included the likes of Star and other digital native brands like Glossier, faced “the steepest losses.”
Siblings Linda and Chris Tawil founded Morphe as a makeup brush business in 2008. Post-acquisition, Forma rebranded in an effort to become a multibrand company. Per Forma’s website, its portfolio includes Morphe, sister brand Morphe 2, Bad Habit, Lipstick Queen, Playa Beauty and Jaclyn Cosmetics.
Forma had also partnered with Ariana Grande on R.e.m. Beauty, the multihyphenate’s beauty brand, but it will remain unaffected by the proceedings. Industry sources with direct knowledge of that business said that Forma was R.e.m. Beauty’s licensee, and that the brand was finalizing arrangements to take its operations in-house. The brand is said to perform well. In retail partner Ulta Beauty’s most recent earnings call, R.e.m. Beauty was cited as an engine for sales growth in makeup, Ulta’s largest category.
R.e.m. Beauty did not immediately respond to WWD’s request for comment, nor did Forma on the nature of its relationship with R.e.m.
Although R.e.m., which launched in 2021, helped in makeup’s broader recovery, pandemic-induced challenges in makeup factored into Forma’s declines. Controversies among the influencers it partnered with, including Star and Charles, led it to sever ties with them. Supply chain woes also hurt the company’s top line.
The company’s C-suite was also rejiggered. Last year, Eric Hohl, longtime president of Too Faced, was named chairman and chief executive officer of Forma Brands, succeeding Myles McCormick. Hohl’s résumé includes roles at Hard Candy, Billabong and Ashworth.
More recently, the flagship Morphe brand announced its store closures last week via social media.
”Following a careful evaluation of all aspects of our business, we have made the strategic decision to enhance our focus on the company’s wholesale and e-commerce operations going forward. We believe this shift will position Morphe to better compete in the broader beauty landscape and more efficiently reach our customers where and how they shop,” a statement from a company spokesperson read at the time.
Simon Cowell, president of Forma Brands, said, “Over the last year, Forma Brands has been implementing initiatives to stabilize our business and reposition our organization for long-term growth. This agreement is a testament to the strength of our brands most meaningful to our consumers, including Morphe and Morphe 2. We will have additional financial resources available to invest in our multicategory portfolio, product launches and innovative brand and marketing strategy as we advance our vision to inspire creativity, promote inclusivity and connect with consumers around the world through beauty.”