June 30th, 2013 - GP Investments, Ltd. [BOVESPA: GPIV11] ("GP Investments" or "GP"), with its head office at 129, Front Street, Penthouse, Hamilton HM 12, Bermuda, a leading alternative investment firm in Latin America, announces the investment of R$70 million (approximately US$32 million) to acquire 33% of Cor do Brasil S.A. (the "Company" or "Beleza Natural"). The investment will be made through GP Capital Partners V, L.P. ("GPCPV"), a private equity fund managed by GP Investments V, Ltd., a wholly-owned subsidiary of GP Investments. Post-closing, the founders will continue to lead Beleza Natural’s operations and GP Investments will have relevant governance rights.
Beleza Natural - the name means "Natural Beauty" - is a beauty institute chain focusing on Class C consumers in Brazil. Founded in 1993, the Company has developed innovative and exclusive products and services for curly hair. It currently operates through 13 stores in three states (Rio de Janeiro, Espírito Santo and Bahia) and recorded revenues of approximately R$140 million in 2012, counting services and product sales.
The demand for Beleza Natural’s products and services is very high and, most importantly, is growing rapidly. Revenues have grown at a CAGR of almost 30% since 2001 and can continue to increase significantly. Beleza Natural’s success to date is intimately linked to its rigorous quality standards, which ensure elevated levels of client satisfaction, and the high return rate built into its business model: clients typically visit the institutes every month.
Beleza Natural’s operations have been designed to serve large numbers of clients in a process that eliminates the dependency on specific employees that is very common in traditional salons. Also, the combination of high margins and low working capital requirements translates into significant returns on invested capital. In the past two years the Company has selected new store locations, training processes have been improved and senior executives were hired. As a consequence, Beleza Natural is ready to replicate its business model and launch an aggressive growth plan.
For GP Investments, the acquisition of a significant stake in Beleza Natural represents an opportunity to participate in a company that enjoys clear competitive advantages, and to benefit from favorable market tailwinds. Beleza Natural focuses on a growing pool of consumers who culturally and habitually give priority to expenditure on beauty in general, and hair care in particular. Brazil is the world’s third largest market for hygiene and personal care and GP believes that Beleza Natural is a unique vehicle to provide exposure to this market and the increasing purchasing power of Brazilians.
"Both GP and Beleza Natural are celebrating 20 years as part of Brazil‘s continuing development. Jair Conde sold his taxi, a Volkswagen Beetle, to build up his wife Zica’s business, a beauty salon like so many others in our country. Besides Mr. Conde’s car, the savings and the dreams of his partners Rogério Assis and Leila Velez also contributed to the start up of the company. Twenty years later, the investment equivalent of a Beetle has created a company with the greatest potential for growth and innovation in Brazil’s beauty industry. GP aims to contribute all of its accumulated knowledge in business management to help Beleza Natural to perpetuate, and to transform this potential into reality. After all, imagine what this successful and passionate team can achieve with an investment of R$70 million, which is the equivalent of roughly 10,000 Beetles?" said GP Investments Co-CEO Fersen Lambranho.
The partnership with GP Investments will allow Beleza Natural to accelerate its growth cycle and consolidate its governance and management practices, so strengthening its position as a national reference in the beauty and hair care sector.
Conclusion of the agreement is subject to approval by CADE (Conselho Administrativo de Defesa Econômica), the Brazilian antitrust agency.