By Khadeeja Safdar
The next Avon lady could be in your Facebook feed.
Younique LLC, a social-media-driven cosmetics company that sells products through about 200,000 "presenters," on Tuesday agreed to be acquired by Coty Inc. in a transaction that values the four-year-old startup at $1 billion.
Coty, whose brands include CoverGirl makeup and Clairol hair dye, said it plans to buy 60% of Younique for $600 million in cash. Younique's founders, siblings Derek Maxfield and Melanie Huscroft, would own the remaining 40% and stay withthe company as its chief executive and chief visionary officer, respectively. Younique said it was profitable and had about $400 million in revenue in 2016.
Mr. Maxfield, a computer programmer who previously founded a software company for the direct-selling industry, paired up with his sister Ms. Huscroft, who has a background in advertising and spent 16 years as a homemaker, to build the Lehi, Utah, company. The siblings couldn't immediately be reached for comment.
Younique sells cosmetics ranging from $19 lipsticks to $39 moisturizers, often through virtual parties on Facebook and other social platforms. Part of its marketing is that it is a "mission-first" company that supports a foundation that helps women who were sexually abused.
Mr. Maxfield also has used his personal story, which includes a battle with leukemia in the 1990s and his Mormon faith, to recruit salespeople. "I may not know of you personally, but I draw strength from the fact that across the ocean there is an army of women who are carrying out that same mission for us," he told a group of U.K. salespeople in 2015, according to a video of his remarks posted on YouTube.
Unlike Avon Products Inc., Younique's sales are mostly made online, with presenters using social media to inform friends and family about deals. If users buy the products within an allotted time frame, the presenter receives royalties. Presenters also recruit other salespeople to their networks and collect additional royalties. The job is designed to appeal to young mothers who can earn income by working from home.
Younique is part of a crop of upstarts that have taken the direct-selling business model pioneered by companies such as Amway and Avon and adapted it to the internet age.
Rival Rodan + Fields started as a department-store brand but now largely relies on a direct-sales force to pitch its skin-care products on social media. The San Francisco-based company said its revenue increased 90% in 2015 to $626.9 million.
Both Rodan + Fields and Younique launched in the U.S. but now sell their products through networks in several countries. Avon, meanwhile, has struggled to expand its ranks of salespeople and struck a deal last year to sell 80% of its North America business and a 17% stake in the parent company to Cerberus Capital Management LP for $605 million.
The Younique deal was announced as Avon hosted a gathering of hundreds of its top sellers in Scottsdale, Ariz. A key part of Cerberus's strategy for the company is to make it easier and more profitable for representatives to sell online and through social media.
One big change: Avon representatives will now make as much profit for online sales as they do for in-person orders. The company also is working to help representatives beef-up their social-media presence and get products morequickly to consumers, a big change given that Avon's 130-year-old system still relies heavily on paper catalogs and timelines created to accommodate the postal system.
Coty is the latest consumer-products maker to scoop up an online upstart, allowing it to sell products directly to customers and sidestep department stores and specialty retailers such as Sephora and Ulta Beauty.
Last year, Unilever PLC paid $1 billion to acquire online razor seller Dollar Shave Club. Coty in 2015, bought parts of Procter & Gamble Co.'s beauty business for about $13 billion, an effort to expand its footprint in the sector.
The Younique acquisition is expected to close at the end of Coty's fiscal third quarter.
In a statement, Coty's chief executive, Camillo Pane, called the siblings "tremendous entrepreneurs who have built one of the most engaging and fastest-growing e-commerce companies in beauty."
--Sharon Terlep contributed to this article.
Write to Khadeeja Safdar at email@example.com
(END) Dow Jones Newswires
January 10, 2017 14:49 ET (19:49 GMT)
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