Revolution buys BH Cosmetics brand out of Chapter 11 bankruptcy

Revolution Beauty Group has acquired certain intellectual property assets and inventory of United States cosmetics brand BH Cosmetics Holdings, it announced on Friday, for $3.9m (£2.91m).

The AIM-traded firm said the acquisition was financed through its existing cash resources.

It said the “highly complementary” acquisition would enhance Revolution’s strategy to offer consumers quality beauty products at affordable prices.

Launched in Los Angeles in 2009, ‘Badass with Heart’ (BH) Cosmetics was described as a brand with a “strong point of view”, producing vegan and cruelty-free cosmetics for loyal ‘generation Z’ consumers.

With more than 6.5 million social media followers, BH sells through its own direct-to-consumer channel, as well as a number of “focussed retailers” across the US and Germany.

The brand, which is well known for its makeup brushes, would strengthen categories within the group's current portfolio, the Revolution board said.

In 2019, BH delivered net revenue of $55.8m and was only distributed across online and retail channels in the US and Germany.

Covid-19 “significantly impacted” the business, with revenue decreasing to $33.7m in 2020, generating a loss of $22.5m, caused by high operating costs.

Revolution said it would consolidate BH Cosmetics into its wider operations over the course of 2022, leveraging synergies across existing product development, supply and distribution.

It said it would “re-energise” the BH brand with new products, and use both Revolution Beauty and BH's relationships in the US, the UK and internationally.

Given that, sales attributable to the acquisition during the first half of the financial year ending 28 February 2023 were expected to be “minimal”, as Revolution onboarded new BH suppliers, built stock levels and integrated BH into its operations.

BH Cosmetics filed for Chapter 11 bankruptcy protection in the US on 14 January.

Following US court approval on 18 February and after the satisfaction of customary closing conditions, Revolution Beauty's subsidiary RBI Acquisition Holdings became the successful purchaser of the BH brand, its social media accounts, customer database and certain inventory.

“BH Cosmetics is an iconic US-born brand with a loyal fan base across digital and social platforms and loved by celebs and make-up artists everywhere,” said chief executive officer Adam Minto.

“As a cruelty-free vegan brand, BH aligns with our ethos - its strong offering in colour cosmetics and brushes, perfectly complements our business.

“Bringing BH Cosmetics into the group will help us accelerate our growth trajectory in the US and leverage our existing global ecosystem of distribution.”

Minto said that like Revolution, BH had a “strong heritage” as a challenger brand, and had disrupted the traditional beauty market in the US.

“We remain focused on building a British global beauty brand, capturing the vast market opportunity in mass beauty, and continuing to win customers around the world.

“We're confident the acquisition will deliver sustainable value for all our stakeholders over the long-term.”

At 1228 GMT, shares in Revolution Beauty Group were up 3.97% at 125.8p.