SHISEIDO
Presentation on Acquisition of Bare Escentuals, Inc.
Shinzo Maeda
President & CEO, Shiseido Co., Ltd.
January 15, 2010
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1 Overview of Sales/Profits Post Transaction
2 Overview of Bare Escentuals, Inc.
3 Significance of this Acquisition
4 Overview of the Transaction and Financial Impact
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SHISEIDO
Overview of Sales/Profits Post Transaction (1/2)
Shiseido Bare Escentuals Pro-Forma
(3/09) (12/08) (Simple Sum)
Amount Margin Amount Margin Amount Margin
Sales 690.3 - 57.5 - 747.8 -
Operating Income 49.9 7.2% 18.1 31.5% 68.0 9.1%
Net Income 19.4 2.8% 10.1 17.6% 29.5 3.9%
*Translated to yen based on our 3/09 exchange rate (1/08 - 12/08
average) of $1=103.44 yen
Move on to a new stage to become a "Global Player Representing
Asia with its Origins in Japan"
(Note) The above numbers represent the simple sum and do not
include any consolidation adjustments.
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SHISEIDO
Overview of Sales/Profits Post Transaction (2/2)
Overseas
38%
Asia /
Oceania
17%
Japan
62%
Americas
8%
Europe
13%
Before Transaction
(3/09 Shiseido Consolidated)
Overseas
42%
Asia /
Oceania 16%
Japan
58%
Americas
14%
Europe
12%
Post Transaction
(simple sum)
(Note1) The above numbers represent the simple sum and do not
include any consolidation adjustments. (Note2) Japan segment of
the post transaction include non-US operation of Bare Escentuals.
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1 Overview of Sales/Profits Post Transaction
2 Overview of Bare Escentuals, Inc.
3 Significance of this Acquisition
4 Overview of the Transaction and Financial Impact
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SHISEIDO
Overview of Bare Escentuals, Inc.
Name: Bare Escentuals, Inc.
Founded: 1976
Location: California, United States
Businesses: Manufacturing and distribution of cosmetics
Employees: 2,779 (as of December 28, 2008)
Key Brands: Mineral foundation "bareMinerals"
Business Model: 1. Direct marketing such as through TV shopping channels
2. Selling at stores (department stores and company-owned boutiques)
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SHISEIDO
Bare Escentuals, Inc. Products
Make-up
Skin Care
bareMinerals
RareMinerals
Buxom and bareVitamins
md formulations
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SHISEIDO
Business Model
TV shopping
Boutique
Bare Escentuals has built a new business model that actively
utilizes direct marketing channels such as TV shopping and at the
same time aims to secure customers through promoting its products
in department stores and company-owned boutiques
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SHISEIDO
Ms. Leslie Blodgett (Director and CEO)
Biography
Prior to joining BE, she worked for Neutrogena, P&G and Max Factor
1995: Launched bareMinerals cosmetics line
1997: Introduced Bare Escentuals through QVC
2006: IPO of Bare Escentuals
Appearing on TV shopping programs herself, she is the public face
of Bare Escentuals, Inc. Leslie will continue in her management
role after consummation of Tender Offer
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SHISEIDO
Financial Overview of BE
(in 100 millions of US$)
Sales
Operating Income
Net Income
(Right axis: OP Margin)
(Right axis: NP Margin)
600 500 400 300 200 100 0
395 511 556
12/06/12/07 /12/08
200 160 120 80 40 0
139 169 175
35.2% 33.1% 31.5%
12/06 12/07 12/08
100% 80% 60% 40% 20% 0%
100 80 60 40 20 0
50 88 98
12.7% 17.2% 17.6%
12/06 12/07 12/08
100% 80% 60% 40% 20% 0%
Strong sales and profit growth
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1 Overview of Sales/Profits Post Transaction
2 Overview of Bare Escentuals, Inc.
3 Significance of this Acquisition
4 Overview of the Transaction and Financial Impact
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SHISEIDO
Our Long - term Vision
To Become a "Global Player Representing Asia with its Origins in Japan"
Hurdles as global player
Boosting its growth potential in markets around the world to
achieve higher growth than the global cosmetics market
Transforming the management culture to continue generating ROE
and operating margin comparable to those of global competitors
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SHISEIDO
Benefits of the Acquisition (1/3)
Acquisition of new brand value
Bare Escentuals
Pioneer in mineral-based cosmetics popular among natural-minded
consumers Leading share in the mineral foundation market
Partnership
Shiseido
Established mega-lines and relationship-building lines as its two
pillars in Japan Strengthening its brand strategy overseas
centering on the global brand "SHISEIDO" and BPI's designers
fragrance brands
The transaction will enable us to build a competitive brand
portfolio that can accurately respond to a wide range of customer
needs
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SHISEIDO
Benefit of the Acquisition (2/3)
Strong complementary relationship for distribution, sales,
and research and development
Bare Escentuals
Active use of direct marketing
Securing customers through department stores and company-owned
boutiques Owning distribution/sales channels infrastructures in
North America
Mutual use of distribution and sales infrastructures
Shiseido
Built the largest distribution network of prestige cosmetics in
Japan Also expanding sales channels in the Chinese market
Advanced R&D capabilities
Expand contact points with a variety of customers Improve the
productivity of distribution/sales infrastructures Utilizing our
R&D capabilities with particular focus on skin care
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SHISEIDO
Benefit of the Acquisition (3/3)
Strengthening operational bases in North America
Strong market presence of Bare Escentuals, Inc. in North America
Strong brand awareness through the direct marketing efforts
800 retail outlets and 1,500 spa salons in the United States
Improve our presence in North America
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1 Overview of Sales/Profits Post Transaction
2 Overview of Bare Escentuals, Inc.
3 Significance of this Acquisition
4 Overview of the Transaction and Financial Impact
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SHISEIDO
Outline of the Acquisition
Method
Tender offer by a special purpose acquisition company to be
established under "Shiseido Americas Corporation," our subsidiary
Offer Price
$18.2 per share (40.8% premium to the 3-month average price)
Acquisition Cost(assuming 100% acquisition $1.7bn (160bn yen)
Deal value including target debt $1.9bn (180bn yen)
Offer Period
We expect the offer to commence in late January (within 10
business days from announcement) and to be open for 30 business
days, subject to possible extensions and a subsequent offer
period
Other
Transaction has been approved by the Board of Directors of
Bare Escentuals
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HISEIDO
Financing for the Acquisition
Financing will be a combination of cash and cash equivalents at
hand(30bn yen)and a bank bridge loan(150bn yen)
Optimal financing selected from a range of options, after taking
into consideration the business condition, financial position and
market trends
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SHISEIDO
Impact on Consolidated Performance
Sales and profits will be consolidated from the year ending March 2011
Project team will be established immediately after consummation of
the tender offer
Discuss and determine specific policies and execution plans to
maximize the acquisition synergies at an early stage
Details to be announced at the appropriate time as soon
as they are determined
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SHISEIDO
Shareholder Return Pre-Acquisition
Strategic investments leading to new growth, consistent dividend
payment and flexible share buybacks
If no M&A transactions are pending, priority placed on shareholder return
Pay stable cash dividends and buy back and retire treasury stocks
flexibly, focusing on achieving a total return ratio target of
60% for medium term
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SHISEIDO
Shareholder Return Post-Acquisition
Changing situation given the large acquisition of Bare Escentuals
(Shareholder Return Post-Acquisition)
Taking into consideration the changes from the acquisition, we
may need to review the policy of "total return ratio of 60% for
medium-term"
Will continue
focusing on maintaining consistent dividends and increasing
dividends linked to
profit increases
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SHISEIDO
Our Future Goal
Sustained growth as a global player representing Asia with its
origins in Japan
Previous Three-Year Plan
Establish foundation
as a global player
FY 2005
Three-Year Plan
Phase 1
Improve quality of
activities across the board
Establish an undisputed presence in Asia
FY 2008
FY 2011
Phase 2
Get into growth
trajectory
Phase 3
Make a leap forward
Become a global player
FY 2014
FY 2017
FY2017: Net sales in excess of (Y)1 trillion (over 50% overseas sales);
Consistently generate solid operating margins (12% or higher); ROE
comparable to that of global competitors (15% or higher)
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SHISEIDO
International Efforts
1. Growth Strategy in the Global Markets Renovation of the global
brand Active investments in growing markets such as China Entry
into untapped markets
2. Management to Respond to Accelerated Globalization
Strengthening operation platforms in countries already entered
into Upgrading HR development program globally Introduction of a
core information system
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SHISEIDO
Our Vision for the Next Step
Europe
Designers Fragrance Brands of BPI
Asia
Global Brand
"SHISEIDO"
North America
Bare Escentuals
- -Continue to be a company driven by the business expansion in Asia,
particularly China
- -Have multiple major global brands being rolled out worldwide
- -Increase presence in Europe and North America
The True Global Player Representing Asia
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SHISEIDO
This moment. This life. Beautifully.
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SHISEIDO
The tender offer to which this presentation relates has not yet
commenced, and this presentation is neither an offer to purchase,
nor a solicitation of an offer to sell any securities.
Stockholders of Bare Escentuals are advised to read the Tender
Offer Statement on Schedule TO, the offer to purchase and any
other documents relating to the tender offer that are filed with
the Securities and Exchange Commission (the "SEC") when they
become available because they will contain important information.
Stockholders of Bare Escentuals may obtain copies of these
documents for free, when available, at the SEC's website at
www.sec.gov or at the Shiseido's website at
http://www.shiseido.co.jp/e/ir/ir_news/index.htm.
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