California-based hedge fund and activist shareholder Butler Hall Capital has issued an open letter to French skincare company L’Occitane, urging its board of directors to relist on a US exchange and reconsider the company’s valuation following news of Blackstone’s potential bid to acquire the business.
The shareholder called for L’Occitane to separate its brand, Sol de Janeiro, to realise its enterprise value, drawing on the example of another of its brands, e.l.f Beauty, which L’Occitane has valued at $9bn.
The letter read: “We believe the largest driver of this valuation discrepancy is the fact that this is a company run by a European management team headquartered in Switzerland, listed and trades solely in Hong Kong, yet much of its growth is emanating from a US brand that is heavily indexed to the Americas.
“Ultimately, we believe a relisting in the US and a separation of Sol would lead to 100% upside for the stock.”
Butler Hall currently owns 1.5m shares of L’Occitane.
Javier Gonzalez Lastra, Investment Partner at Tema ETFs and Portfolio Manager of the Tema Luxury ETF (LUX), which is the only US retail luxury ETF that holds L’Occitane, said: “We are of the view that L’Occitane is severely undervalued. The group owns (since 2021) one of the most exciting brands in beauty in the US: Sol de Janeiro. A brand that is close to smashing through the $1bn sales threshold and has potential to become a multibillion-dollar franchise, giving it a valuation potential of $6bn.
“Our preference … as shareholders is for the company to be relisted in the US, where investors will be happy to pay a much higher multiple for a beauty brand with such a strong growth outlook.”