French skincare giant L’Oréal SA has agreed to acquire luxury cosmetics brand Aesop, which was founded in Melbourne before developing a cult global following, for an enterprise value of $2.53 billion.

The transaction caps months of negotiations as other companies, including private equity firm Permira and Chinese investment firm Primavera Capital also showed interest in the Australian brand, owned by Brazil’s Natura & Co., people familiar with the matter told Bloomberg last month.

At L’Oreal, Aesop joins a cast of luxury brands such as Lancome and Yves Saint Laurent as the French company bets on a continued drift toward high-end cosmetics.

“The deal marks a shift in L’Oreal’s M&A strategy, having typically targeted brands at an earlier stage in their development to harvest significant revenue synergies,” Molly Wylenzek, an analyst at Jefferies, wrote in a note to clients. “Aesop’s development is already well underway.”

L’Oreal bought Skinbetter Science, a U.S. maker of skincare creams distributed via doctors, in recent months to boost another high-end segment it calls “active cosmetics,” with brands like as La Roche-Posay and SkinCeuticals.

The company’s luxury unit surpassed its mass-market division two years ago to become the group’s largest, and L’Oreal expects the trend to continue. Aesop also brings a focus on clean, sustainable ingredients that can appeal to young consumers, said Bernstein analyst Bruno Monteyne.

For the Brazilian beauty firm Natura, the transaction will help cut debt and focus on turning around other businesses.

Aesop opened two stores in China recently and they’ve become the brand’s top sellers worldwide, underscoring its potential there, according to Rogerio Fujimori, an analyst at Stifel.

“L’Oreal has the deep pockets and internal resources to scale up Aesop globally and significantly accelerate its development in China and in travel retail, turning into a billionaire brand in coming years,” Fujimori said in a note.

Founded in 1987, Aesop has developed high-end cachet among skincare devotees with its range of pricey creams and lotions for skin, hair and body made from ingredients like geranium leaf and mandarin rind. From its first store in an underground parking lot in the Melbourne suburb of St. Kilda in 2003, it has since expanded globally including dozens of locations across New York and London.

‘Ascending Currents’

“Aesop taps into all of today’s ascending currents and L’Oreal will contribute to unleash its massive growth potential, notably in China and Travel retail,” Nicolas Hieronimus, L’Oréal’s CEO, said in a statement.

Natura acquired a majority stake in the business in 2013. Known for its natural, ethically sourced cosmetics, Sao Paulo-based Natura has faced a hard time trying to expand globally, with disruptions brought on by the pandemic and Russia’s war in Ukraine leading to cost-inflation pain.

As the brand grew, outpacing Natura’s other ventures such as Avon and Body Shop, investors increasingly saw it as a crown jewel of the group. Aesop reported revenue of $537 million last year. It was Natura’s most profitable business, according to Lucror Analytics.

The Brazilian beauty company had been mulling a partial or total sale of Aesop as part of a broader overhaul being conducted by Fabio Barbosa, who took over as chief executive officer last year. He has sought to simplify the company’s structure and cut costs.

The transaction price implies a “punchy” multiple of about 4.7 times sales, compared with about 5 times for L’Oreal and rival Estee Lauder Cos., but the growth potential appears greater, Stifel’s Fujimori said.

In a survey with 32 local and foreign investors ahead of the transaction, Banco Bradesco BBI said most of its clients expected Natura to sell 100 percent of Aesop at a valuation range of between $2 billion and $2.5 billion.

Bank of America Corp. and Morgan Stanley advised Natura on the sale while Centerview was sole adviser to L’Oreal. The deal is expected to close in the third quarter.