Nexus Capital buying Canada’s MAV Beauty Brands amid financial woes

29 Nov 2023 --- MAV Beauty Brands has found a buyer amid financial challenges. After seeing its year-on-year Q2 profits nearly halved, the company won approval from the Ontario Superior Court of Justice to pave the way for Nexus Capital to acquire “substantially all” of its assets and subsidiaries.

Nexus Capital Management is a private equity firm based in Los Angeles, US. The sale is expected to be completed mid-December subject to customary closing conditions or waivers.

The decision to pursue this asset sale marks a strategic move for MAV Beauty Brands amid financial pressures. Despite this transition, the company is assuring stakeholders that its day-to-day operations will continue without interruption.

MAV Beauty Brands is a global hair care and personal care platform focused on managing independent brands.

MAV Beauty Brands portfolio brand Cake Beauty (Image credit: Cake Beauty).It holds a portfolio of four brands: Marc Anthony True Professional, Renpure, Cake Beauty and The Mane Choice. These brands offer premium-quality hair care, face and body care products, reaching consumers in over 25 countries through various major retailers globally.

Declining revenues
In an August earnings report for the second quarter, Serge Jureidini, president and CEO of MAV Beauty Brands, flagged that previous distribution losses continued to press on overall sales and earnings results.

“We are continuing work to strengthen each of our brands with innovation and marketing plans, and we are encouraged by the progress to date with our operational improvements and costs savings initiatives,” he maintains.

MAV Beauty Brands’ Q2 2023 total revenue was listed at US$20.7 million, compared to US$25.4 million in Q2 2022.

For the Canada/US region, quarterly revenue fell by 17.7% to US$18.9 million in Q2 2023, compared to US$22.9 million in Q2 2022. 

For the International region, revenue was at US$1.8 million, compared to US$2.5 million in Q2 2022. 

“The revenue decrease year over year principally reflects the impact of previously disclosed reduced distribution in the US mass and drug channels,” details the company.

Gross profit was US$9.3 million in Q2 2023 (45.1% margin), compared to US$10.8 million (42.4% margin) reported in Q2 2022. 

The increase in gross profit margin was primarily attributable to proceeds of US$600,000 from business interruption insurance received in Q2 2023, relating to a cyber security breach at the company’s primary third-party logistics partner in February 2022.

Adjusted EBITDA in the quarter decreased to US$2.7 million, from $3.5 million in Q2 2022, mainly due to lower revenue.

MAV Beauty Brands portfolio brand Renpure (Image credit: Renpure).Trading comes to a halt
In response to this impending sale, trading for MAV Beauty Brands’ common shares on the Toronto Stock Exchange (TSX) were halted. The TSX will delist the company’s common shares on December 21, 2023, marking a new chapter for the organization.

Michael Cohen, partner at Nexus, sees “long-term potential” in MAV Beauty Brands’ brands, products and loyal consumer base.

“We have established a new capital structure and strategic plan designed to renew growth and profitability, which will enable the company to invest in new product innovation and build on its partnerships with retailers,” adds Kayla Dean Obia, vice president at Nexus.

MAV Beauty Brands continues to monitor the impact of inflation on supply chain input costs, while implementing its select price increases and procurement cost savings initiatives.

Pressure has mounted on many companies struggling to remain profitable in a high-interest rate environment.

Natura &Co’s has also been active in deleveraging to shore up its balance sheet with the recent sale of The Body Shop to international private equity group Aurelius earlier this month — a deal valued at £207 million (US$258 million).

By Benjamin Ferrer