<div id="readability-page-1">Recent signals hint the Chinese skincare and cosmetics maker could be eying a purchase of the U.S. brand, whose sale to a Chinese investment group was disclosed this week <h4>Key Takeaways:</h4> <ul> <li>Skincare products maker Yatsen Holding completed the first tranche of a $120 million note issue last week, which it may use to expand into the global marketplace</li> <li>The funds could be used to purchase the struggling Erno Laszlo skincare brand, which this week was purchased by a Chinese group for $44 million</li> </ul> By Doug Young A decade after its founding in the Southern city of Guangzhou, arguably China’s earliest window to Western commerce, cosmetics and skincare company Yatsen Holding Ltd. (YSG.US) appears on the cusp of making its own westward expedition to New York. The object of Yatsen’s affection could be a much older company, the Erno Laszlo skincare brand, which boasts nearly a century of history but has recently fallen onto hard times. Those are our major conclusions following a series of recent developments, including a new fundraising by Yatsen that could be used to purchase the acquisition, as well as the sale of Erno Laszlo to a Chinese group this week. A common thread in those two developments is private equity company Trustar Capital, which is both a member of the Chinese group that bought Erno Laszlo and also happens to be an investor in Yatsen’s new fundraising. All this comes as Yatsen, which owns the Perfect Diary chain of beauty stores, has struggled over the last three years with losses and declining sales for its core color cosmetic products. The company has been engineering a turnaround by shifting its focus to skincare products, which have been logging strong double-digit sales growth and overtook color cosmetics as its biggest revenue source last year. But even that growth is slowing. Yatsen predicted its overall revenue growth would decelerate to between 10% and 20% in the current quarter through June, compared with about 20% growth in the previous two quarters, according to its latest quarterly results announced this week. Yatsen is just one of many Chinese consumer companies that are struggling right now as ordinary people grow increasingly cautious in a slowing economy. Within Yatsen’s two main product areas, color cosmetics is one area where consumers have been cutting back most, while skincare seems to be showing more resilience. That reality is backed up in the financials of numerous Chinese skincare companies like Hong Kong-listed Natural Beauty Bio-Tech (0157.HK) and IPO applicant HBN Technology, which bothreported solid revenue gains last year. With so many question marks hanging over the Chinese market, Yatsen appears to be looking to make a big global jump to hedge against the uncertainty at home. The first clue at the company’s global aspirations came in March, when Yatsen announced plans to raise $120 million through a convertible note offering. In that announcement, Yatsen listed overseas expansion and strategic M&amp;A as two potential uses of the funds. Notably, the two main buyers of the notes were Yatsen founder Huang Jinfeng and Trustar, a private equity arm of state-run financial powerhouse Citic Capital. “By drawing on Trustar Capital’s proven track record in cross-border acquisitions and post-merger integration, Yatsen aims to further its global expansion strategy and solidify its position in the global beauty market,” Yatsen said at the time. The company initially hoped to complete the first tranche of the note issue in March, shortly after the announcement. But that was apparently delayed, and it only announced the first tranche’s completion last week on May 21. Most notably, the new announcement added Hillhouse, one of China’s most successful private equity investors and a longtime Yatsen backer, as a new investor in the convertible notes, alongside Huang and Trustar. <h4>Stock rally</h4> Announcement of the first tranche’s completion, including the addition of Hillhouse to the list of investors, touched off a rally for Yatsen’s New York-traded stock. The shares initially rose 9% the day of the announcement, and continued to climb after that, including another 8% gain after its latest financial results came out this Tuesday. All said, the shares have risen 57% since the original announcement. While the latest financial results were broadly positive, the more likely catalyst for the rally is probably expectation for an acquisition using funds from the convertible note issue. Last week’s fundraising announcement didn’t include any significant new information beyond the addition of Hillhouse to the buyer group. But the original announcement in March suggested that money from the fundraising could be used to buy a company in Trustar’s portfolio, with Axilone, a maker of beauty product packaging, named as one specific example. A look at Trustar’s current investment portfolio on its website reveals that one of the most recent additions is Erno Laszlo. According to a report this week on BeautyMatter, an industry website, the Erno Laszlo brand was acquired by a group led by Rouyuchen, a Chinese investment company based in Guangzhou, where Yatsen is also based. The purchase price was just $43.8 million, according to the report, which pointed out the buyers were more interested in the brand than Erno Laszlo’s business fundamentals, which are quite weak. Significantly, Trustar was one of the members of the buyer group, the report said. This type of acquisition is quite typical for Chinese private equity, which often looks for struggling famous Western brands with an aim to turning them around. A higher-profile case in the related luxury sector comes from private equity giant Fosun, which purchased several luxury brands in the 2010s and combined them into a single New York-listed company under the Lanvin brand. While we can’t say for certain that Yatsen will purchase Erno Laszlo, whose history dates back to 1927 and has been historically linked to movie stars like Marilyn Monroe and Audrey Hepburn, the signs certainly point in that direction. As we’ve previously noted, Yatsen’s latest results show positive signs of recovery on its growing skincare business. Revenue from that part of its business rose 58.5% year-on-year to 574 million yuan ($85 million) in the first quarter to account for 56% of its total. That offset a 5% decline in its color cosmetics business, resulting in 22.5% overall revenue growth. In a disappointing sign, the company slipped back into the red with a loss of 61.9 million yuan for the quarter due to heavy marketing spending. Before that, it had reported 10 consecutive quarterly losses dating back to 2023, before briefly returning to the black in last year’s fourth quarter. The bottom line seems to be investors are hopeful that an acquisition, most likely of Erno Laszlo, could bring some excitement back to Yatsen, which can use its manufacturing and marketing experience to try to breathe new life into a famous Western brand. While the chances for such a turnaround are hardly guaranteed, the step looks intriguing enough to probably provide some upside for the stock over the next year or so. To subscribe to Bamboo Works weekly free newsletter, click here</div>

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最近跡象表明，中國護膚和化妝品製造商 Yatsen 可能正在考慮收購美國品牌 Erno Laszlo。Yatsen Holding 上週完成了 1.2 億美元票據發行的第一部分，可能用於全球市場擴展。這些資金可能用於購買本週以 4400 萬美元被中國投資集團收購的 Erno Laszlo 品牌。

- Yatsen Holding 完成首輪 1.2 億美元可轉換票據發行。  
- 力圖收購陷入困境的 Erno Laszlo 品牌。  
- 此舉可能提振 Yatsen 的市場表現和股價。

Is Yatsen setting its sights on famous but struggling Erno Laszlo?