TSG sees 25x return on exit of IT Cosmetics

  • One of largest investment multiples in history of TSG
  • San Francisco firm took minority stake in 2012
  • Cosmetics company broke out on  QVC, Shopping Channel

TSG Consumer Partners will reap a more than 25x return on the pending sale of its minority stake in rapidly growing makeup brand IT Cosmetics to L’Oréal for $1.2 billion in cash, according to a source familiar with the firm.

TSG’s gain of 25x after expenses, but before its carried interest, marks one of the largest in the firm’s 29-year history, the source said.

A spokeswoman for TSG declined to comment.

“We’re really proud of IT Cosmetics, the passion it inspires in consumers and the exceptional growth it achieved,” Chuck Esserman, founder and chief executive of TSG Consumer, said in an email to Buyouts.

TSG worked with the two entrepreneurs at the company — Jamie Kern Lima and Paulo Lima — on strategy, recruiting and developing a relationship with direct-marketing firm Guthy-Renker, he said. Esserman declined to comment on the firm’s investment gain on the deal.

The San Francisco firm in 2012 invested in the Jersey City, N.J., company from its TSG5 fund, which disclosed $1 billion in commitments in early 2007, according to a filing.

In the 12 months ended June 30, the company rang up sales of $182 million, a 56 percent increase.

L’Oréal plans to keep company management in place and fold the IT Cosmetics brand into its Luxe division, which includes Yves Saint Laurent, Armani and Urban Decay.

Blythe Jack, managing director at TSG, said in a statement that IT Cosmetics has become one of the world’s fastest growing beauty companies.

L’Oréal USA CEO Frédéric Rozé said in a statement that IT Cosmetics “earned the devotion of its highly engaged consumers and we see potential for significant growth in the years to come.”

TSG closed its TSG7 A and TSG7 B funds in 2015 with $2.5 billion of committed capital.

Action Item: Contact TSG Consumer, http://bit.ly/2aG0wOu

Correction: This story has been updated to correct a headline with the wrong year TSG invested in IT Cosmetics.

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