LG Household Buys TheFaceShop for $364 million

Asian private equity house Affinity Equity Partners has sold a South Korean maker of lower-price cosmetics to LG Household for $364 million, marking one of the country’s most lucrative exit deals.

Affinity, one of the more active equity funds in Asia’s fourth-largest economy, might reap three to four times its investment in TheFaceShop from the sale, after it reportedly bought the company for about 80 billion won ($69.23 million) in 2005.

LG Household & Healthcare, the country’s No. 2 cosmetics company, said in a statement on Tuesday it had acquired 90 percent of TheFaceShop for 420 billion won ($363.5 million), including a 70.2 percent stake held by Affinity.

The effective payment by LG would be only 350 billion won ($302.9 million) in cash as it would recover about 70 billion won held by TheFaceShop.

The purchase comes as sector leader Amorepacific Corp has been expanding into the low-price cosmetics market at home while it focuses on high-end products abroad.

LG, which has so far focused on premium cosmetics products, said the purchase was made to strengthen its competitiveness in the middle- to low-end of the market with an eye for customers in their teens and early twenties.

The acquisition would also allow it to produce synergies with TheFaceShop, South Korea’s No. 3 cosmetics company, which until now had outsourced its R&D, production and distribution.

A previous attempt by Affinity to sell the cosmetics company broke down last year amid the global credit crisis.