TPG Capital nears stake in Anastasia Beverly Hills that could value company at $3 billion

Key Points
  • TPG Capital is nearing a deal to acquire a minority stake in Anastasia Beverly Hills that could value the brand at roughly $3 billion, sources familiar with the situation tell CNBC.
  • Makeup company has roughly $200 million in EBITDA, sources tell CNBC.
Anastasia Soare arrives to the Anastasia Beverly Hills Launches Beauty Line Exclusively at Sephora Champs-Elysees on September 2, 2016 in Paris, France.
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Private equity firm TPG Capital is in advanced talks to take a minority stake in Anastasia Beverly Hills, a deal that could value the cult makeup brand at roughly $3 billion, sources familiar with the situation tell CNBC.

The company's estimated value is a sign of just how much the makeup industry has changed in the past few years, as influencers create their own makeup empires and makeup brands seek new channels to reach customers outside of the increasingly challenging retail landscape.

Makeup shopping is moving online, where shoppers can easily restock on their favorite products, but most brands do not yet have a strong internet business nor online connection with their customers.

Anastasia was founded by Romanian-born Anastasia Soare, whose eyebrow makeup and shaping business rode the crest of renewed interest in thick eyebrows over the past two decades — a contrast to the thin arches of the 1990s. She was early to the Instagram wave, using her passionate following to propel sales. She counts among her fans social media guru Kim Kardashian.

The brand, which includes her eponymous brow-focused product line as well as other makeup, is sold on its website with free standard shipping, at standalone stores or in retailers like Ulta Beauty.

It has roughly $200 million in earnings before interest tax depreciation and amortization (EBITDA), and attracted interest from both corporates and private equity firms in its sale process, said the sources.

The sources requested not to be named because the information is confidential. Anastasia could not immediately be reached comment. TPG declined to comment.

Foot traffic in both department stores and drug stores where cosmetics brands are sold are losing foot traffic. Sephora, meantime, is giving increasing amounts of floor space to its private label products and brands that are owned by its parent, LVMH, like Rihanna's Fenty makeup.

High-end brands like Estee Lauder have sought to respond by investing in its brands' websites. The owner of Clinique and Bobbi Brown has so far resisted selling directly on the nation's largest online retailer of cosmetics, Amazon, weary that its stark white pages do little to preserve its high-end mystique.

"We continue to invest in our brand dotcom, in our retailer dotcom, and in the platforms where we control our assets and our destiny," CEO Fabrizio Freda told analysts recently when asked whether the company would sell directly on Amazon.

Coty-owned Cover Girl, meanwhile, recently partnered with Walmart for an augmented reality venture.

Where cosmetic companies have been unable to develop online brands on their own, they have looked to acquire it.

L'Oreal acquired social media darling NYX cosmetics for $500 million and Estee Lauder acquired Too Faced for $1.45 billion.

Meantime, beauty blogger Huda Kattan's cosmetic business, Huda Beauty, recently sold a minority stake to TSG Consumer Partners at a roughly $1 billion valuation, sources have told CNBC. That valuation was in large part a result of her massive social media presence.

TPG has its own track record with beauty deals. Its smaller investment focused arm, TPG Growth, acquired makeup brand e.l.f. Cosmetics in 2014 and took it public two years later.

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