Yunji, Inc. sponsored ADR Class A group (PPRUY.US) sold its beauty business to L'Oreal for 4 billion euros in an effort to reduce debt and revitalize its core fashion business.

Yunji, Inc. Sponsored ADR Class A group (PPRUY.US) announced on Sunday that it has agreed to sell its beauty business to L'Oreal Group for a transaction amount of 4 billion euros (approximately 4.66 billion US dollars). This move is a strategic step taken by the new CEO, Luca de Meo, to address the group's high debt and refocus on its core fashion business. According to the agreement, French beauty giant L'Oreal will acquire the perfume brand Creed under the Yunji, Inc. Sponsored ADR Class A group, and also obtain an exclusive 50-year license - to develop perfumes and beauty products based on the fashion brands owned by Yunji, such as Gucci, Bottega Veneta, and Balenciaga. The current license for Gucci perfumes is held by Coty Inc. Class A (COTY.US), and analysts expect this new license to take effect after Coty Inc. Class A's license expires in 2028. This sale is an important step for the Yunji, Inc. Sponsored ADR Class A group to reduce its net debt. As of the end of June, the group's net debt had reached 9.5 billion euros, in addition to 6 billion euros in long-term lease liabilities, which has raised concerns among investors. Meanwhile, the growth slowdown of the group's largest brand, Gucci, which is facing a demand slowdown in the key Chinese market, has further intensified the group's pressure. It is worth noting that de Meo secured this deal less than two months after taking office, indicating that he is reversing the major strategic shift implemented in recent years by former CEO Francois-Henri Pinault. The Pinault family is the controlling shareholder of the Yunji, Inc. Sponsored ADR Class A group. The beauty business of Yunji, Inc. Sponsored ADR Class A group was established in 2023, when the group acquired the perfume manufacturer Creed for 3.5 billion euros, aiming to diversify its business and reduce its reliance on the profit-making brand Gucci. However, the development of the beauty business did not go smoothly, recording a loss of 60 million euros in the first half of this year. At the same time, Gucci's revenue in the previous quarter fell by 25% year-on-year, putting more pressure on the Yunji, Inc. Sponsored ADR Class A group to deleverage further to avoid further downgrading of its credit rating. Previously, de Meo, who took office as CEO in September, had promised shareholders to take difficult measures including business rationalization and possible restructuring to reduce the group's debt. As the world's largest professional beauty company, L'Oreal had previously acquired the YSL beauty business authorization from Yunji, Inc. Sponsored ADR Class A group for 1.15 billion euros in 2008, and successfully launched the brand's popular perfume. This acquisition of Yunji's beauty business is the largest deal L'Oreal has made to date, surpassing the 2.5 billion US dollar acquisition of the Australian brand Aesop in 2023. In addition, there have been reports this month that representatives from Armani Group have been in contact with L'Oreal. The late designer Giorgio Armani specified in his will that L'Oreal was one of the preferred buyers for a minority stake in his fashion brand. L'Oreal has also stated that they are currently examining "multiple" potential acquisition deals.