Quadrant-backed Adore Beauty to meet institutions over potential float

Kate Morris, from Adore Beauty. Picture: Picture Andrew Tauber

Quadrant Private Equity’s online cosmetics business Adore Beauty will start management meetings with institutional investors in the first week of September.

It is understood that meetings for its non-deal roadshow are being booked in this week with institutional investors, as revealed by DataRoom online on Monday.

Fund managers are believed to be eagerly awaiting details about the private equity-backed operation that was founded by Kate Morris in 2000.

Quadrant’s pitch to investors will be that demand will remain strong for Adore Beauty’s 200-plus cosmetics brands and more than 13,000 beauty care products from well-known industry players such as Calvin Klein, Clinique, L’Oreal, Revlon and Lancome.

The brands are being sold online at a time that shoppers are avoiding malls due to the COVID-19 pandemic.

Working on a potential float of the operation is UBS and Morgan Stanley.

The big test will be whether the buyout fund, which is known to command top dollar for its investments, achieves its price aspirations of $600m for the business.

Some suggest the business is more likely to be worth about $400m.

According to IBISWorld, Adore Beauty is the major online player in the cosmetics industry in Australia, although it only has 10 per cent of the market share in what is a highly fragmented industry.

The concentration is expected to remain low over the next five years, as new websites offsets growth of certain players.

As part of its competitive positioning, Adore Beauty offers free standard shipping and free samples with every order over $50.

The company also offers additional value-added customer incentives, including free trial packs, an easy 90-day return policy, and same-day dispatch on orders placed before 1.00 pm.

Quadrant bought a 60 per cent stake in the company in September last year and now has aspirations for expansion into Asia, with international customers accounting for about 45 per cent of site traffic.

Adore Beauty’s revenue growth has been estimated to be at about 55.8 per cent annually to around $77m due to its low cost base, relative to bricks and mortar stores.

Elsewhere, speculation is mounting that another block trade by Kogan’s founders could be imminent.

It comes after the online marketplace posted a 55.l9 per cent lift in its full year net profit to $26.8m due to booming online sales.

While shares were down more than 5 per cent in Monday’s trade, Kogan’s market value has soared since the COVID-19 pandemic and is now about $2.3bn.

Its founders, Ruslan Kogan, who currently holds about 20 per cent of the stock, and David Shafer, sold shares in 2018 through investment bank Citi.

The pair had about 42 per cent of the listed business and that sale of just under 7 per cent of the stock took their interest down to about 35 per cent at the time.

Then, shares were sold at $6.41 each.

Some suspect that Canaccord and UBS could be on the ticket this time around.

Kogan said its full-year revenue increased by 13.5 per cent to $497.9m was driven by growth in its exclusive brands products.

Before Monday’s trading session, when shares closed down more than 6 per cent to $20.51, shares closed at an all-time high of $21.84.